y idea would be a still camera, and then shrink and enlarge the character.
That is quite possible, you can set the scale of a sprite with an action like so:
Sprite set scale to K/distance_to_camera
Where K is usually 1 but you can tweak it to adjust the strength of the effect.
And then, could you take it a step further? For instance, have the sprite stay the same size but the background get smaller and bigger? Say your 3d space was a tree in front of a mountain. You can't walk through trees, so once the tree has been enlarged to the maximum size (which would make it like you were right in front of the tree) it wouldn't enlarge anymore. Then, when you went in front of the tree, it would go to a new layout that didn't have a tree in it and just a mountain. This would also solve issues with blurry graphics. For every item you pass, you would need a new layout. Also, if you wanted to add bumpy camera, well there would be to ways. One would just use the bump effect while you were walking, and the other, say for instance if you walked up a hill, would move the sprites down or up depending on the current view (size) of the object. If you were to look around with your mouse, it would just scroll about a panoramic landscape. I think I might make a demo of this! <img src="smileys/smiley17.gif" border="0" align="middle" />