its not isometric ._.
you may want to look up the meaning of isometric :P
They are sprites, they have 3D co-ordinates, so doing stuff like making stains on walls is possible, but doing all the hit tests and drawing all of the stains (probably using spheres or something) in lua wouldn't be the best way to do it (seeing as lua is quite slow and inefficient), go bother hampa about that request.
Anyway i has some pics of some projects i have been working on.
So i was messing around with this new 3.3 function that draws disks on a 3d plane, came up with an idea to make better looking dojos, heres a pic of it in action:
A nice floating smiley i made as a test
And heres a glitch that makes toribash look cooler