Sudo 3D game via rotation with 2D image skewing

I’m trying to recreate what Notch created in his “Break the Tower” game http://www.mojang.com/notch/ld12/breaking/ and I’m stuck. I haven’t worked out the math yet but I suspect he has a flat image of the island that he skews as the “camera” is rotated, but I’m still confused how he moves the sprites (like the trees and workers). When the game is rotated their grid positions must be constantly updated correct? But this must lead to some minor positioning errors because if he’s working on a grid of like 100x100, sometimes a sprite would have to jump to the next closest grid space rather than the exact spot it should be when working with such small intervals of “rotation”. I’m also curious to how he accomplished the correct changing of z positions of all the sprites when the game board is spun.

I’ve completed a few sidescroller esque experiments in Java and want to try some tricker stuff so if anybody had any input on this I’d be very appreciative.