Sorry everyone!
I have re-uploaded a new archive for you to download again. This time it includes the Libs/ drawer which has the Libraries required to finish compiling the game. I used SnoopDOS to suss out the problem. If you had installed Backbone from the original package before extracting and trying this pack it would have worked, which is why I didn't notice the problem myself since I already had Backbone installed properly with the Libs/.
Anyway, download this new one and try to compile. I'm not sure if you'll need to copy the Libraries over to your SYS:Libs/ drawer or if they'll work from PROGDIR:Libs/ but you can try it yourself the way you like.
http://home.exetel.com.au/~amiga/SonicBackbone.lhaMrs. Beanbag, sorry about that mod, I didn't even listen to the result before uploading the pack, and only discovered what a poor job OctaMED did of converting it after I had tried it in the first level. I suppose someone with more experience with music software will have to do the conversion, I've barely used them before.
I think you're right about Sonic using 32x32 tiles, I made my version use 16x16 because Backbone doesn't support slopes and hills, so the smaller tiles let me have a smoother pseudo-hill than the larger tiles would. Your Beanbag engine obviously handles slopes properly so that'll make it easier for me to convert the graphics. I'll have to create a new 16 colour palette combining the two 16 colour palettes from the foreground tiles and enemy sprites and remapping the graphics to suit, so it won't match the Mega Drive's colour count and the graphics will have to be compromised a bit, but I'll do my best. It may end up looking similar to what I've already done with the Backbone game though, which also combines the foreground tiles and enemy sprites (and player sprite) palettes into a single 16 colour palette. Thankfully I won't have to include Sonic's own colours, so the tile colours will have priority over the enemy sprites, which may be recoloured to work.
Since the Beanbag engine isn't identical to Sonic, I don't think we need to try and duplicate any of the original levels accurately, and think it would be nicer to have a completely original Sonic game for the Amiga, using our own custom graphics for new stages and enemies. Take the PC fangame Sonic XG for example, for a completely original Sonic game I think it's extremely impressive. Check out the pics and gameplay video here:
http://www.williamg.plus.com/SXGWEBSITE/Something like that would be incredible, our own unique Sonic game. Of course after you've made Mr. Beanbag 2 and completed your new engine perhaps we can have a go at reproducing a more accurate clone of one of the original Mega Drive games.