I don't agree. Without tricks the SMS' pallet has more useable colours in it, whilst the NES has a bunch of redundant blacks and greys (and I've read that Nintendo actually told developers not to use two of the greys), and the SMS has a more consistent pallet which represents all colours fairly, whilst the NES has a pallet of shades slightly biased towards certain colours (whilst having 10 shades of black which are indistinguishable from each other, there is no good yellow in the entire NES pallet).
The timing based emphasis trick is nice, but do we know how useable this trick actually is in-game? I think Final Fantasy might have used this trick, but it was only a minor effect which flashes before battles, it didn't really add new colours in a useful way during gameplay. Also I've looked through all the new colours and there still isn't any decent yellow, it just now has a whole mass of sludge yellow.
I thought it was 4 3 colour pallets for tiles (+ transparency),and 4 3 colour pallets for Sprites (pretty sure that's what Tomaitheous said) can you designate any number of the 8 to either tiles or sprites then? IE use 6 pallets for tiles and 2 for sprites (19 colours onscreen across all tiles)? if not then I don't see how thats more flexible, NES has to split its tile pallet of 12 colours into 4 groups and then choose which group each tile uses, whilst on SMS, even if you simply choose one pallet to use specifically for tiles and 1 pallet to use specifically for sprites you get 16 colours to use for tiles wherever you want on the screen, more colours in one pallete than all the NES sub palletes put together anyway.
I think there's something about sprite swaps though? with NES you can just designate different pallets to different sprites and it automatically makes a selection of different coloured enemies?
Wouldn't this just mean you need bigger cartridges for SMS (ie more of an economic issue than graphical) and you say that SMS cartridges are cheaper to manufacture anyway due to lower pin count and the NES games always using cartridge mappers for things like scrolling.
Maybe you could draw the tiles so they can be flipped and re-cycled for different environment elements?
Do SMS games tend to use software sprite flipping or extra sprites? If it was done by using extra sprites then there seems to be no reason to me why they couldn't have different animation dependant on which direction the sprite was facing (ie if the character swings his left arm in front one direction it could be behind the other)
It seems that if it were done it software it would only be an issue early on, with subsequent games re-using the sprite flipping coding.
I was also wondering about the dynamic tiles, couldn't you at least draw the tiles in a certain way, and then animate them by flipping them? this could work for things like water perhaps?
Either way Jurassic Park shows that dynamic tiles were quite do-able on the SMS, it has them all over the place.
are there any other possible applications for tile flipping?
Kamahl seems to think the SMS is better for parallax style effects too, and I've seen talk about SMS tricks mentioned on other forums -
"easier to set up scanline interupts".
"the SMS allows you to decide how to use VRAM, and you have some control over where things like patterns and name tables are stored in VRAM, allowing for some nice tricks."
There's also mention of 2X sprite scaling, but apparently its not that useful as you have to scale all sprites or none (this is apparently used for the status bar of Earthworm Jim).

