So far, it sounds really good. A couple of things though, that felt a bit off:
The idea of the 8-bit character phpbophages is pretty cool, but I don't see those you've chosen to be particularly scary. How about you make it 4 phobophages instead and they are the pacman ghosts? Those things might not be big time scary, but millions of people playing the game and running away from them certainly leave their mark. And there's even a good way to temporarily win against them: eat a piece of fruit. They will come back, of course, unless they are actually banished, but you'll have some peace for the time being.
When it comes to your items, they sound really good (love the red ridinghood stuff), but they feel disconnected. I mean sure, the dragon throwing them out to test the gang would have it make sense, but it feels like it might be beneficial for your story if you stay within a theme, and the religious artifacts especially feel out of place there for me. Since it doesn't seem you've got too much planned for those and they are just objects to be retrieved, maybe it would be better to replace them with something else. Maybe ride the whole "faerie tale" train home?
You could get the 8 bit monsters by going for a "the sorcerers apprentice" sort of route. Maybe even have a big, blue wizards hat with golden stars on it be the item that allowed the 8 bit monsters to appear. It would only allow for 1 such apparition (the 3 counting as 1 here) to be active at any time, so conjuring up something else would not work, as long as the 8 bit monsters are out there, to make it less of a problem.
Then you could look for all kinds of fun stuff from the faerie tales. For example, instead of the kemmler zombie, let the item be a glass sarcophagus. The newbie sorcerer just lost his girlfriend and was looking for a way to get her back. He was about to go black magic, when the sarcophagus appeared. He put her inside and some time later she was alive again. Well, sort of. Maybe a bit changed. Or a lot. Doesn't even have to look like a zombie, but maybe her mind is replaced by something entirely alien, and she just causes a lot of chaos by wandering around and not quite looking for blood, but being confused of the world around her. You've seen those "alien mind in a mortal body" episodes of various tv shows? Something like that.
Speaking of snow white, how about 7 pickaxes? They would change the mood of the wielder tremendously, and they would make them look for treasure, with a high success rate. Problem is, they start digging freaking anywhere. And they can conjure the pickax to them. So once in a cell, they would just dig themselves out again.
A few other ideas:
- An amulet made from a wolf's tooth that causes storms.
- A golden ball that makes the one holding it irresistible to the opposite sex, but when they touch them they are turned into a frog.
- A pillow that controls the local weather.
- Boots that grant the wearer mythic speed.
- A donkey figurine that produces gold coins (seemings) when you pull on the tail.
- A bludgeon that summons the body of a thug for itself out of the nevernever when the owner is sleeping, to go out and kill people the owner dislikes.
And so forth, you get the picture. That way, your game will stay with a theme, which makes it a bit more coherent, I think. And a being like that dragon collector would probably use a section of their collection for this rather than bits and pieces from the entire collection.
I would ask, what makes the red court vampire so dangerous that he needs to be locked away like that? For someone who can build a prison like that, it should surely be possible to kill it, they are not that tough. Maybe the red court vampire is carrying something else, and by imprisoning it, that thing was also imprisoned. Or its life force is used to power the prison. The warden would need to feed it some blood every now and again, but that's not too bad, I would say. Maybe there's even more this is linked to all around the city? Maybe even the totems, which are just part of the prison. And the genius loci is bound to the red court vampire in order to strengthen the prison for the dragon.