1. How can I go about creating foot steps similar to those of Knytt and Juni? I am making my own ambient game and would like a similar atmosphere as to that of KS.
I can't give much info on question 1-3, but as for 4, you will need some fancy programs to get a good result. I personally suggest PhotoshopCS4 (http://www.adobe.com/ap/products/photoshop/family/), however that Is quite an expensive program. If you don't have the cash, try Paint.NET (http://www.getpaint.net/) or GIMP (http://www.gimp.org/)I really don't think photoshop is the best program for knytt-style graphics, actually. It strikes me as more of a photo manipulator than a pixel art program. Nifflas probably used MMF's built-in sprite sheet editor to make the graphics.
(which I don't know how to use the color wheel)Ya know the colour tablet on the right sidebar? Under it there are three squares. The lone one on the right show the transparent colour. The two stacked ones on the left show the background and foreground colours. Double click the top square. BAM! Colour wheel! :P
I could never figure out how the ambients at ModArchive were made.