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Okay, so as a rule of thumb, as of now, any and all fanwork that uses existing IP is illegal. But there’s others who were working on Klonoa fan games and I don’t think they ever encountered any trouble. And there’s a whole slew of Klonoa fan music that was never touched by Namco either, so you should be fine. Companies can be lax about properties
This is more or less how I see the situation - most companies don't seem to really care about fangames unless they're for-profit. (There have been exceptions, of course, but in Klonoa's case Namco isn't likely to pursue legal action.)