I don't know so much about possum, but using my little knowledge I'll try to give truthfull answers to these questions.

Are you going to accept mods?

I think so. Possum will have a sprite editor, a scripting language, a tileset editor and a level editor.. you can probably make very different games in it.

Is this going to be a j2 clone in gameplay?

I don't think so. You will have physical attacks like punches, and the story is very present in the game. The story can come to life in the levels because of the scripting language.
The game also has rpg elements, and different guns..

Approximately how much of the game is done?

Don't know. As far as I know the engine itself is still being worked on, and they did not adress scripting at all yet, for example. I believe they're still working on the graphics engine.

The story is coming along well, I don't know about the artwork.