For anyone who enjoys this sort of thing, I found this postmortem of an Alone in the Dark clone for PICO-8 highly informative:
Amazing. I never get over the 2 bit colour illusion of scale.
What an excellent example of designing for the medium instead of trying to make the medium do something it's not good at! Your whole approach shows a real love, like a delicate respectfulness, that I think characterises early games and is less apparent as the systems get better (though I am sure it is still there).
Does the upscaling from 200x120 happen pre or post dithering?