Not exactly an excellent artist either but I can give you some advice on workflow.
First off there's no substitute for practice. Download a bunch of good pixel art, zoom in, see what makes it good. Open up all the Hammerwatch assets and check out their style. Google "pixel art tutorial" and read and copy a bundle of them.
The most helpful site I found was
http://www.pixeljoint.com/forum/, they have plenty of good tutorials and a helpful community which can give you some good feedback on your work.
As far as the details:
No the background doesn't need to be purple, make the background transparent, Hammerwatch can use the alpha channel.
There isn't a maximum size or space or whatnot, but I'd look up the sizes of Hammerwatch's existing assets and try to stick to similar numbers. For example Mr. Knight appears to fit inside a 24 x 24 box.
To animate you need to make a single image file with each frame in it. Check out the tutorial I put up, its long, and poorly formatted, but I think I talk some about it.
Do you need to animate it? Maybe? That's up to you. A wall doesn't need to be animated, but a waterfall does.
Good luck, lots of practice, and the wall seems cool so far.
http://www.petesqbsite.com/sections/tutorials/tuts/tsugumo/http://www.pixeljoint.com/forum/forum_posts.asp?TID=11299
