This is the current looks of the game. I dropped the dithering, the 3-color palette and added some atmosphere.

This is the map I'm using to sketch out locations and such:

I finished the chisel mechanic. I am mostly done with my coding. There are only the textboxes and certain story triggers left.  

Currently if the player points at a breakable stone, the stone is highlighted and if the player clicks on it, it breaks (stops rendering the mesh and releases particles). Particles then sink into the sand.

Story elements will be hidden inside these stones. ( They will not be cubes in the finished version, these are for demonstration purposes.)