I gotta say, this is a freakin' cool hack. I love the new sprites of the 'real' Pokémon; unless I'm mistaken, they weren't made by Nintendo at all? Looks like I might have to start over when you update with the fakes, though, huh?
My one complaint is that (and maybe I'm just retarded for this) the letter thing seemed like more of a sidequest when the old guy said "I seem to have misplaced my letter." I ended up wandering around wondering what I was supposed to be doing for a while before I decided to go ahead and look for the *invisible* letter. Again, maybe I'm just an idiot, but the fact that that was the story advancing event wasn't clear enough...
Crits aside, I'm eager to see more! Keep it up!