newt what are you talking about?
Ok maybe I need to explain it better.
You make an orthographic game that looks like Ultima above (or chess) on one layer. Not one image, that's just my test. You make a proper tileset. Floor tiles, walls, characters, everything.
Movement and Z order are easy, since it's orthographic. The higher the Y and X, the higher the Z order. It's solved, the same way Ultima solves it. You don't have to do anything else.
Then you draw everything on two canvases, one rotates what you see by 45 degrees, the other squashes the rotated version to 50% height. The end result is isometric.
Yes, you will need to make all your vertical sprites (walls, characters) vertically stretched by 200%, so they survive the squash. And you have to know where they're facing so you can choose the appropriate animation.
But other than that, you get basically free 3D. No?