Well, it's been a while, but I believe this particular level is starting to take shape.

I've added the standard sky and scenery backrounds in the Rage of Aquarius tileset on layers 8 and 7, and a "near" backround on layer 6, but after playing around with lighting a bit I ended up coming across a way to create a decent "foggy" atmosphere.

What I did was use Set Light events around the starting point with Intensity set to 127, and the the rest of the variables set to 0 to avoid filling the entire screen with white. That created a light fog effect, but then I put a transparent black tile on a foreground layer with Tile Width and Tile Height checked in the layer settings, and did the same with a transparent white tile on layer 5.

The end result is a realistic "dark" fog and atmosphere, with any lights leaving holes in it. Anything in the backround is more difficult to see due to going through a transparent white tile, giving the impression of a deeper layer of fog. Interestingly, projectiles from weapons still create light, despite normal lights not having any positive effect.

I'm thinking this may prove to be useful for atmospheric effects if a solid black tile and a solid white tile are worked into tilesets. I don't recall seeing much in the way of foggy levels in JJ2 before.