As long as Space themes in an obvious way (IE a cave floating through space) then it's fine :)
How about a cave on the moon with an astronaut working his way through it?
Those sorts of things!
We're allowed to use royalty free music/sound right?
Is it okay for multiple people to work on the same game?
Because we can't really prevent this, yes it is fine for multiple people to work on a game. The downside of course is that only one of you can win the prize. We can't give multiple trophies/rep/badges out, one entry per account.