I really like how this all pans out. The in battle animation... perfect! I could nitpick about how the attacks don't connect or all that, but I think this misses the point. The visual style is right up my alley, I really like it. Given the gameplay is tactical/strategical enough, and I like the story, I would really give the game a good look and maybe put some money into it to play it.
as to how the portraits are used for dialogs... I think I like it. I really like how this pans out. I am not 100% sure the back-to-the-player portrait works, even though I do like how it makes the whole thing looks more realistic. Do you plan to turn the view if the character with the back to the player should show facial expressions? Will you show that with the small character icon? Do you try to get away without facial expressions?
I have to say, I am a big fan of simple facial expressions, or "emoticons", being shown with the character icon in the speech bubble, the way its done in Breath of Fire 4... very simple character icons, about 5 or so unanimated emoticons, but it really helped make the character come alive. Some never games I remember used different big character portraits, exchanging them when the characters mood changed. Also liked this, even though that is more work with big HD portraits like you plan to use.
This way the character portrait might have some added value, if you add an "emoticon" function to it. Also helps to anchor the text to one of the characters, images always trump text in this regard.
Is the text translated to english? One of the sad things about russian literature is that its often not translated, unless its a classic. The CIS region is probably big enough to live of sales there, but still...
This is also a big problem with games developed in russia that you need luck to find a developer that speaks english, so sadly as someone who does not speak russian you have to wait for some eastern european guy that speaks some russian to translate dev blogs and FAQs, or try to decipher googles joke translations.
If there is a translation, I would love to start reading it. You got me interested with your illustrations. Makes the story look like something I could enjoy :)
Don't worry about the similarity to the blacksmith... I think the character gained a lot of unique character with the new stuff added.