Pretty cool idea! I played up until the animals started showing up, but I couldn't figure out how to craft a knife. One small thing I'd recommend is to allow any amount of spaces between the crafting recipes items, like "craft wand + pebble". Not a huge thing, but I think it would make sense.
Also, another small thing I'd recommend is to reset the text after a few seconds when you press enter on the side screen and it says "The conditions are not met". I accidentally pressed enter when I opened the screen, so I didn't get to read the original text. It would be nice if it went back to the original text after a few seconds, or when you press tab again.
I'm not sure if it really follows the "transformation" theme and the 1-bit graphics very strongly, but it's still a pretty cool game, I think it has quite a bit of potential if you keep expanding it! Maybe some upgrades for later in the game, like increasing the field of view, so instead of exposing one tile when moving around, you could expose the 4 adjacent tiles too, or maybe 8 tiles including the corners. Also, things like different biomes with a slightly different look to the ground tiles and unique items could be cool. I think there's many different places you could take this game.