I used flash for animations (but you can use any other app for animations, even paint ), exported frames as image sequence and then used Texture Maker (again, you can use any other similar tool) to create atlas. Some internet search should give you a lot of apps for 2D animations and sprite/atlas makers.
As for art side if you want to create a decent characters and items be prepared to a lot of training in drawing (the easiest approach would be to draw it on paper, scan it then outline it and colorize, or buy graphics tablet).
Also another idea could be to use 3D tool if you have 3D modeling skills. You can render your animation into image sequence and use those in atlas generation tools. Btw, if you are a student you can get 3D Studio Max for free in non-commercial license.