It's a tough problem. From a programmer perspective I would note that the repeating tile effect enhances the feeling of flatness. That may be one reason the offset helped. Note that on an angle in 3D, that same texture would look squished, so maybe scale the tiles in the direction of the gradient. Also note that in 3D the closer tiles would appear larger. How one would achieve effects like that in pure 2D without mismatching edges... I have no idea. ;)

Not sure if this is ontopic, so please ignore if it is. Did you thought about non-rectangular tiles? They are still in 2D, but Y axis is affected by vertices "height". Ligh'n'shadow does the rest of the magic. Thats how we do it in our game (see attachment)

...is that a remake of knights&merchants, or something similar? oh please, do tell me that it's going to have skirmish...

If the light comes from the upper-left corner, why do you darken those edges as well? they should be lighter. also, if you're perspective is a little from the front, the back edge is to be shorter than the front.

Also, I know this isn't the first thing on your mind right now, but once you've got the perspective correct, you might also want to tint the shadows a little. Because of different lightsources and their whitebalances, shadows are never just black or grey. In an earth-like atmosphere the shadows would have a little blue in them (the direct, yellow sunlight gets blocked out, but the indirect blue light, reflected in the atmosphere still reaches the shadowed area). In a very similar manner, the highlighted area would have a light yellow-orange tint.

The result would look look smth like the attached

bw,
Tobl

[attachment=11352:hill.png] [attachment=11354:hill2.png]

I was shadowing the sunlit side because I just couldn't get it to look right.
That does look better, I'll keep that in mind while working on it - thanks!