As we can read on Wikipedia, Link’s Awakening began as an unsanctioned side project; programmer Kazuaki Morita created a Zelda-like game with one of the first Game Boy development kits, and used it to experiment with the platform’s capabilities. Other staff members of the Nintendo Entertainment Analysis and Development division joined him after-hours, and worked on the game in what seemed to them like an “afterschool club”. The results of these experiments with the Game Boy started to look promising, and following the 1991 release of the Super Nintendo game The Legend of Zelda: A Link to the Past, director Takashi Tezuka asked permission to develop a handheld Zelda title; he intended it to be a port of A Link to the Past, but it evolved into an original game.
Tezuka recalled that the early free-form development of Link’s Awakening resulted in the game’s “unrestrained” contents, such as the unauthorized cameo appearances of characters from the Mario and Kirby series. Tezuka intended the game’s world to have a similar feeling to the American television series Twin Peaks, which, like Link’s Awakening, features characters in a small town.
He suggested that the characters of Link’s Awakening be written as “suspicious types”, akin to those in Twin Peaks—a theme which carried over into later Zelda titles. Tanabe created these “odd” characters; he was placed in charge of the subevents of the story, and wrote almost all of the character dialog, with the exception of the owl’s and the Wind Fish’s lines.
Check artemis251’s website for more infos about the unused Link’s Awakening sprites
Thanks to MathUser & Robert Seddon for some of these screens!
You can find more info about Zelda: Link’s Awakening in the Zelda Wiki!