Over the Xmas & New Year week I was able to get a lot of work done on the engine. Larger sprites such as trees are starting to work and combat is looking a lot better now (Just not visually but better in code and feel).
Had a few issues with the larger sprites being on the same Y axis and overlapping that I was having difficulty solving. Thanks to a quick post on Reddit r/gamedev I was able to solve the issue by adding the X axis into the calculation. I seems obvious now but I spent a lot of hours thinking about it and just never clicked to also add the X axis into the calculation.
(pos.Y + pos.X/1000) / 1000
This seems to be working perfectly now. You can see the original issue here.