Level 2 (which is actually the only level I've worked on so far) is coming along amazingly well. I have all the puzzles worked out and coded. The only thing left is some tweaking and the boss room. There are now 4 global (meaning they can be taken anywhere) items in the level. There are also a number local items which can't be taken out of the room they're found in. Some items are just used as a "fetch this item" type quest, but a couple have an action associated with them which will help you solve the puzzles throughout the level.
I figured out how to make some professional looking shading and lighting effects. You can see the difference in the two screen shots below. This has opened up a lot of new possibilities for the game's graphics.