It is honestly quite simple.
When walking around in the environment, use Z-depth versus Y coordinate as illustrated in the BeeKeeper demo. Easy enough.
It's when a character goes inside an isometric region you'll need to get a little trickier.
You need to add a variable "type" to all actors. Among other things, you'll have a "backwall" type, "frontwall" type and a "floor" type. You can also add a "ceiling" type if you want to turn off ceilings when you step on the floor tile. You should parent the floor to the backwall, frontwall and ceiling, this is how these actors are controlled by the floor when it is stepped on.
When the main character steps on that floor, his Z-Depth range will now be limited to the backwall Z-depth plus 1/2 the height of the floor. This will assure he always displays behind the front wall when standing on the floor and in front of the backwall. You have to apply the same formula to all objects and items that sit on the floor type. I did it with a function in the global code to properly assign Z to any object on the floor including your characters.
Some additions to this mechanism you'll want to consider :
1. A region bounded by a floor will need a collision mask parented to it that is invisible but can still detect events to prevent characters from walking through walls.
2. Objects need collision masks beneath them to keep your character from walking straight through them.
3. Your character will need a collision mask, best consisting of a line underneath their feet that collides with 1 and 2 to keep them from walking through solids. (Although walking around them and displaying behind them correctly will work perfectly) Remember a lot of these collision masks can be reused for a great many objects in the game at various sizes. They can just be an oval if you're not too picky. See BeeKeeper demo for collision checking with solids, except Makslane is not using a base mask under the object that is invisible.
This sounds difficult but once you construct these objects they can sit off to one side of your playfield on screen and be cloned as drop-in construction blocks for your own isometric map making kit.
Sorry, volunteering this information is as far as I am going to go into it. It is accurate, tested and not too hard to implement. I have done a demo starting with BeeKeeper and building on it, took me all of an hour to test it with a large map. It works great with a few limitations. I did several experiments using other concepts before I hit on this approach which was the most straightforward and gives good results.