FIXED
There you go
the body parts are ordered by how they are ordered in the layout editor.
but the big problem was your player and monster were on 2 separate layers. that won't ever work for overlapping.
also don't have so many layers
the most you need is 3 (front ground, middle ground, background)
maybe more for special effects.
otherwise just put everything ..EVERYTHING.. in the green family, and give it a 'z' value to say how close to the screen it is. if its on the same layer it will sort itself.
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i like your art style. good luck with the game.