You nailed it.
The actual Gameboy has a lot more limitations than just 160x144x2bpp. It has different challenges other than "just keep to this res". In fact, thanks to the wonders of postproc shaders, dithering, and FBOs, you can make anything 160x144x2bpp.
And then what limits are there to push? What makes the games different other than "hey you can just dither everything to 4 shades of grey"?
Thus rule 1, "The aim of GBJam is to create a GameBoy themed game". And that's where arguments start to break out. Because no longer is it OK to just take any old game, confine it to 160x144x2bpp, and be done with it. Or is it?
Everyone has their own interpretation of rule 1. For at least some entrants it's "LOL MAEK A GAEM :D :D :D :D :D". For me it's hard to nail because there's some good stuff that happens that does violate the limitations, but OTOH doesn't outright piss all over the GB.
Limits are a good thing. They force you to be creative. They inspire you to work to them. They cut out a lot of the clutter, letting you focus better. They are there to be fought to the bitter end. But they are NOT there to be outright violated.
But when you have a limitation as murky as that, suddenly you're in some state of uncertainty, and you have no idea where the line actually *is*. You don't feel like you really have anything to push.
And the thing is, if you are confined to the limitations of the actual GB, you will be inspired to make something different from what you would if you were only confined to, well, 160x144x2bpp.
If this were called FCSSJam or 4CJam, this thread would not even exist.