For the sake of art I think you should start it from scratch and reference to that one, not just edit on it!
About the swords, I don't think they need to be longer 'cause:
1. they already distract from the character as long as they are now
2. it's gonna be a problem when you've got animation to do, the sprite is gonna be REALLY big!
btw, how are you gonna use a sprite like this in a game? It's viewed from the front!