To my knowledge, you can't create a total conversion for Dredmor, nor alter the character sprites. I believe modding is purely additive--you can add skills, items, spells, monsters, craft recipes, even rooms that the mapgen will use, but you can't delete or override existing content.

Actually, you might be able to override some stuff, since the system uses ID strings which could collide, but I'm not sure what the result would be. That said, it's still all content-level. Fundamental stuff (primary and secondary attributes, damage types, for example) are baked into the engine, so can't be meaningfully changed.

A long long time ago, I worked on the idea of a mod that basically replaced a lot of text in the game with funnier lines.
And that was the easy part. :)
I never got very far, but some of it should still be listed on the main Gaslamp Games forum in that one thread, even if a lot of the images got deleted thanks to the hosting site running out.

So, yeah, you can do a lot with this game, but total conversions would be nearly impossible.
Unless the next update for this game, which is coming, surprisingly!, massively improves the Modding capabilities.