Thanks for the responses, Chrono'99.
As for my second question, I don't mean drawing a tile over a priority-Y tile, I mean drawing a sprite. It looks really awful when things are drawing over the characters when they are in front of it. By this, I mean certain "wall" tiles found in the Millenial Fair tileset, things like the top-middle tile of the couch in the tileset for indoors in Present, and especially the singular trees I mentioned before.
I've also tried playing around with Window>Location>Tile properties to manually force a priority-Y tile to draw under the character, but it never changed it. It didn't matter if Sprite Over L1 was true or not, the tile still drew over the sprite. Because of that, I'm beginning to think that the whole "Sprite Over L#" is actually the functionality to build multi-floored maps like the Dactyl's Nest using the Z-plane.