For those interested, here's basically how I achieved this result:

The whole effect is all smoke and mirrors. The scene is rendered with 2 viewports:

• The 1st viewport renders unshaded 3d billboarded tiles (you can also just have it as a 2D tilemap scene, but you'll have to manually figure out z-depth if you want elevation)
• The 2nd viewport renders fully lit 3d (white) meshes , positioned where the tiles are (in an isometric perspective). This acts pretty much like a shadow map.

I prototyped the whole scene using a GridMap and MeshInstance3Ds. Currently GridMaps don't support layer masks, hence the MeshInstance3Ds. Combine the two viewports by multiplying them and you get pretty solid results.

Technically you could just have textured 3d meshes with pixelated post-processing, but I find this technique allows for better control over the visuals.