Right, yeah it's an unfortunate reality that letters need a minimum amount of pixels to be legible!
There's some tiny pixel typefaces out there, which can do wonders with three/four-pixel-high letters, but that might a bit much with full dialogue.
I've found it beneficial to base the resolution on the finest detail in the design document. If dialogue needs to be there, find the smallest pixel typeface you like, then build the ui and graphics out from there.
It sounds like you'll have to go to 480*270 with 2x scale graphics to make it feel like 8*8, but still have your type legible. You mentioned this might cause some annoying issues, but you'll have to weigh those and decide.
All said there may be a technical approach in construct with layers, using layer scale, canvas, etc. But that's beyond my capabilities, so hopefully the much more qualified users here can tell you that! :)