Personally, I absolutely love how things are looking! The art is superbly thought-out and fantastically appealing. You guys definitely know your way around a tile editor, because you seem to have the ability to whip out background and foreground transplants with relative ease. The use of Sonic CD and Sonic 3 backgrounds—as well as bits and bops from several games together—really does well to establish a coherant "Sonic" feel throughout a majority of your art edits, and the color schemes do extremely well to supplement that. Granted, there are some levels which still appear to be extremely similar to the base levels in question, but I'm fairly confident that you guys will have no problem sorting that out.
What I'm really looking forward to here is how you guys will handle editing the music and such. Markey is extremely adept at making custom song imports (he did so for his own hack), and I'm betting he has loads more talent to share with this one. It's great to see that nothing will go to waste in terms of talent.
Overall, I'm totally excited about checking this hack out! Eagerly awaiting its eventual release. Awesome work to all involved!