Question To what extent can one mod the character sprites?

Hello, guys! I have a couple of questions about modding, if you don't mind.
First and foremost, can the sprites of the town characters be changed into something that isn't human-like at all? Like, for example, can one replace them with horses, or other farm animals? Will it still work? What restrictions are there on the NPC sprites?
And the second one, since I'm not very good at art, is there any tutorials on how to modify sprites or draw them from the scratch?