Sierra released most of their AGI games on the Apple IIc/IIe. Given C64 is a roughly equivalently specced machine, there is no reason in principle why they couldn't have ported AGI to C64 as well – it just, for whatever reason, never happened. (One AGI game, "Donald Duck's Playground", was originally developed as a native C64 game, then AGI was used to port it to other platforms.)
Also, given different AGI platforms had different graphics capabilities, I expect even the original Sierra AGI games had somewhat different graphics assets on different platforms – so whatever preprocessing of graphics they are doing to make them C64-friendly, Sierra quite possibly would have done something like that anyway had they made a C64 port back in the day.
> Given C64 is a roughly equivalently specced machine, there is no reason in principle why they couldn't have ported AGI to C64 as well – it just, for whatever reason, never happened.
Agreed about the issues not being (completely) technical. <https://np.reddit.com/r/c64/comments/1r8hgwk/kings_quest_i/o...>
If I recall correctly, the art is done with a form of early vector drawing so that they can use one set of assets on all platforms. They're designed to 16 colors but get downsampled for 4-color CGA mode or monochrome mode.