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Look up Black Mesa on Steam's Greenlight then and give it your support.

Just do yourself a favour and draw a 2d map of this town (btw so far it's not a town it's just a castle with a courtyard) - just a regular top down map with squares instead of buildings (market stands, stables, blacksmith, bakery etc.), draw roads, city gates, wells and other static landmarks. Post it here, so people know the general idea of how it is supposed to look.
When you do that, it'll be much easier to model stuff, again, don't skip this step it will help you a lot.

You still haven't explained what kind of a setting this is supposed to be, what kind of races/creatures are suppose to live and how many of them are living in this town. What kind of an atmosphere is of this town, is it good human town, is it evil empire town, a trading post. What style are you going for high fantasy (Lord of the rings) or low fantasy, urban fantasy, regular medieval (again there's European (French or British) or Middle Eastern style like Assassin's creed for example), or maybe "sword and sorcery" style (like Conan the barbarian).
When you answer all these questions it will make it easier to think of buildings, style, textures, lighting and general atmosphere of the place.

And yes, you need to switch the UV mapping of cylinders, they look strange. On that note, don't use cylinders until later for now put 8-12 sided cylinder objects, it will be less strain on the pc and it will help you if you're placing details and textures on those cylinders.
And you still haven't changed (reduce) the plane texture, again I suggest you leave it for when you're done with modelling.

For starters - can you show how the player's sprite is going to look here? Just an example of the size and style.

How big is this town going to be (population)?
What kind of a terrain is it going to be?
How many roads come into town and are there any landmarks (roads, rivers, hills) and what type of terrain is it?
Add some variation to the look of the city, don't make it just a square with 4 walls, the more you break up the walls the more interesting the scene will look
Keep the style of buildings (medieval, fantasy etc.) and of textures (for example realistic or cartoonish), it will make or brake the scene even if the modelling is not so good.

From technical aspect:
- your shadows are too dark, you need to have a main light (like a sun), but it'd be nice to add more softer and less brighter lights around (especially if it's a night scene)
- don't add textures until you are done with modelling - it is hard to texture stuff when you don't know if you're gonna change the sizes of items and maybe you won't use some items so you'd waste time texturing them
- don't use such a flat surface (plane) for the whole town, it looks kind of boring or at least don't use one big texture, you'll need to place all the items and then draw surfaces on the plane (for example a muddy square, cobbled roads, grass etc.)
- and this is important - watch the ratio of textures, the plane texture is very stretched and the roof one is also a bit stretched, again, don't texture till you're done with modelling
- the wheel cart is a bit big (compared to the wall, it seems like it's 2m high), ratios are important

That's about it for starters. Show some sketches if you have of the town, if you don't make them, planning the scene might seem silly, but it will save you A LOT of time.

The art style is very interesting, will try this out.

EDIT: Finished. Very charming game.
I found 2 bugs though:

Spoiler

- when you remove the spider, if you close the trap door and then open it, the spider will reappear
- while the monsters are singing, you can take the hook at least twice and it'll be in the inventory two times as well

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Well recently AJA's team did a game called "Barely floating", where they used that technique to animate, they have 3 videos explaining the process of making their game and in the 2nd video I think you can see how the characters are made:
http://www.adventuregamestudio.co.uk/forums/index.php?topic=46662.0

And on this point, I'd suggest working with vector program (Illustrator, Inkscape etc.) and not Photoshop or Paint shop, because there's no clean up and no pixel rotation and transformations.

Not having watched the full tutorial yet, I take it there's a relatively straightforward way to create a looping animation using this technique? Googling the question didn't bring up any definite "Yes, here's how you do it and it works fine" answers.

...well if it's like an island in the sea, then you just make a simulation of say 30 seconds, copy it and reverse it back to front (in reverse) - those 2 parts combined make a 1 minute loop.

You can see the sort of waves I'm looking for here. There will be various objects casting light, which is why I want reflections. The cartoony part is less essential, and I can experiment with shaders and filters to get the effect I need.

OK, that's not that bad, what you need to look for is animated bump textures or just regular animated textures, because that's basically a plane. The "reflectiveness" comes from the glossiness of the surface. This should be something you'd need: http://www.youtube.com/watch?v=J6e7vn69Vr4
You can even put a boat on it: http://www.youtube.com/watch?v=q23WFVrQ7GI

Is this going to be a poster? Maybe the crumbled paper texture is not the best solution then, looks slightly weird.

Also the whole thing looks very very washed out, like there's a white layer over the whole  picture. And as somebody suggested, put some other textures behind the character (like faces of other people from the movie. Maybe something in his other hand as well - rosemary, Bible, big handheld cross etc.

I'm looking for a tool to create a high-quality, cartoony looping wave animation with 3D reflections. The ones I've found are only able to do ripples; I want proper, choppy ocean waves. I'm assuming I'll need some kind of 3D app, but some guidance (w/ examples, if possible) would be appreciated.

It'd be nice if you could give an example of something similar to what you want. You want a beach scene, or like a boat on the waves and realistic textures or cartoony ones?
Try looking through this http://www.cogfilms.com/tutorials/Blender-Seascape-Tutorial.pdf although by your description this is again not what you want. In Blender the thing should be called "Blender Ocean Sim" so find tutorials on that, otherwise it's the Fluid Simulator (but this will take some getting used to). I haven't actually been that much into Blender, so I'm not that familiar with it.

Other than those kind of waves, you'd probably have to go for a simulator of some sort (Cinema4d might have them, Houdini, or look within UDK (Unreal Development Kit), it might have a good renderer for waves and a tutorial). When you get the waves, then get the "cartoony" look with a shader. Most work is otherwise is done with texture animation, so no so much waves, but those ripples you mentioned.

Very nice with fun details and cute design.

The site says it should be. On pc it is, since I have a European Steam account.

I've a shameful confession, I've got to catch up on the first four before I can get on to this one!

Well, Steam (and maybe others) have a trilogy bundle, you won't miss anything with the 4th, it's nothing special (although it's ok). Just play the 1st (Shadow of the Templars) so you know how the main characters met and then you'll want to play the 2nd because it's more of the same awesomeness.

Cheers for the link.

Here's the page with torrent: http://www.gamefromscratch.com/post/2012/08/31/Free-art-e-book-Vertex-released-by-Ryan-Hawkins.aspx
Although the download (EU primary) seems to be ok.

Well the 3rd episode is out on all platforms. Played it through and...again some choices you are presented with are not accurate in what result they'll bring (the tone of the written line and what the characters says is sometimes contradictory), that kind of messed me up on a couple of occasions.
Still continuing their trick of how to keep the number of branching stories low, by getting rid of characters and introducing new ones. To be honest I haven't played it thorough more than once (maybe I'll do that when the whole game comes out) so I'm not yet sure which characters might have been saved, but I doubt it.

Spoiler

I'm guessing I could've saved Carley instead of Ben, but I'll go along with this scenario

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As far as I've seen on the end statistics screen, it seems the choices are ambiguous almost to perfection, since the decisions are kept near the 50%...I'm guessing that's good work on the writer's part. The story is getting interesting, though it's the middle on so it's also kind of meandering a lot.

As I've read, I think this is supposed to be aimed at kids, but it has a lot of adult humour in it, so I'm not sure if it'll find an audience. 
I like Robot chicken, sometimes it can be just a tad too juvenile, but otherwise it is a really funny show.

Wow, in 7 days they got $320k, that's rather impressive.

There's an update comment from Cecil, where he says "Where possible, we will release the game without DRM," what does that mean? I thought it was a given to have the game without DRM, since you've basically paid off the game from the launch and the rest is profit, right? I'm not advocating piracy or anything, just saying it'd be kind of dickish to put DRM on a KS funded game...then again, DRM is usually dickish as is.

Sorry, would like to help but my router is very fidgety about port forwarding etc. and I have trouble with it even when it is "working".

Really?!?

Is there really a need to be so patronising about this?!?
...
I really didn't expect that.

Well, yes that did come out harsh, I'm sorry. But that "line" is really foggy, you can basically say anything is BS from history, not doing research or checking for facts about your beliefs and opinions is really offensive to other people. Just because an opinion about a human accomplishment is not perhaps in the same level of grandeur as killing of millions of people, doesn't mean that it doesn't change the attitude towards events.

I firmly believe that historia magistra vitae et testis temporum (or this should be true in a more idyllic world) and when events such as a death of a figure from those same times and history occur, then warping facts and changing events on basis of paranoia and human stupidity (and by this I mean human stupidity in general, not you) is one of the most horrific things that can happen to a civilization.

Sadly, it's not just you Grimm.

It's madness I tells ya, soon people will believe there were "concentration camps" in WW2 where they killed and tortured people.
I mean, yes, there are people who say they were there and there's authenticated photos, dust and rocks from the Moon, repeated missions, people who saw the actual rocket/shuttles launch and land, there really is not any motive to say there was more than 1 mission (because the first one ended the space race basically, so why say were there more than once), but still...

Anian, that's really nice!
(I'd let you make my logo, once I know what to call my company )

Heh, I don't think it's exactly what he/she wanted, just didn't have the will upload the other thing, but still thanks.
(And yeah, no problem)