I probably won't play this since I don't own an AGA machine and I am not much into emulation.
I personally find the graphics lovely, very colorful, very nice... and there's no problem with the setting. You don't need every shoot'em up to be "sci-fi", there are many great examples that have different settings. And then this is no scrolling shoot'em up, it's more like in the vein of games like Alien Syndrome and The Chaos Engine.
Regarding the gameplay... I haven't played, just read opinions and saw the gameplay video... but I personally think you could add some different control methods.
1) the one already in the game.
2) a 2 button method with button 2 changing weapons, and hold direction while hold fire button
3) a 1 button method where you can hold direction while hold fire button, double click changes weapon if you have not changed direction between clicks.
4) a 1 button method where you can hold direction and space bar change weapon.
Of course, this is just a suggestion, maybe it mess up completely the design you guys thought for the game or you are just not bothered to do something like this.. it's allright
Also, any chance of sharing this Blitz Basic configuration for Notepad++? It could be very handy in the near future