Taking also some of scamocore's improvements, I've reduced, but not removed entirely, the highlights and shadows on the legs and the feet, and also on the stomach. As for the position of the eyes, the lower position does look more "correct", however, I like the slightly-looking-towards-t-the-player for psychologic and representative effect. I feel I can relate better to a character who looks at me. Perhaps Helms point about allowing characters to remain characters, is important here. I feel that, just like in a comic book, in a video game, realism is secondary to representation value. Actually, that's why I'm making my game in 2D to begin with. If I wanted realism, I'd go for a 3D game. That doesn't mean I should do my best to make the sprites look good, though. The player has to feel "hey, that could be me", not "that looks kind of ugly".
To give you an idea of what "the competition" in the free and open software world is doing, consider this snapshot of "The Mana World", a free MMORPG (that's quite fun to play already, and quite popular). I'll be glad if I can make sprites and tiles that are more beautiful and consistent than these:
Edit: some more fiddling with the legs and feet, made the feet smaller and the upper legs longer. I'm unsure if this is better or not.