Ok. Here's my latest version taking in the aspects I liked from Arne's and Surt's versions. I also took into account Rosse's approach of Shape, Volume and Colour identity.
I started with Rosse's idea of the shape being the most important aspect, so reduced the old version I had to a 2 colour (black and light grey) version, similar to the ones Rosse posted. I then used Arne's claws as although they aren't as large as in the original design they had a clear one line pixel seperation between the body and the claws. Similarily I used the thinner arms to provide more seperation from the body.
I then decided that Arne's and Surt's positioning of the eyes one pixel further down worked better than my version as it emphasised the almost hunched over position of the original design and looked a little more menacing. I kept the dark outline around the head (very similar to Arne's monochrome version). I decided that this clear seperation of the head from the body is also just as important as the overall body shape in allowing the creature to be easily recoginised. I now had a 2 colour monochrome version of my sprite.
Then I used the darker grey to push the body back away from the viewer and some dark grey on the top of the arms to suggest it was slightly in shadow from the massive shoulder / carapiece. I also added a small amount of dark grey on the bottom of the shoulders to suggest it was curving away from the light. I used the darker grey on the feet in the same way surt & arne did to push the lower legs back away from the viewer.
I used the darkest grey to suggest the segmentation in the body as in the original design, while trying to avoid it looking like a net or dither effect by making the top part of the pattern lead into the outline of the bottom of the shoulders, further empasising the shape outline. I did not use the light orange pixels in the body as in Arne's version because in my opinion the colour is too bright in that dark volume. I did add a bit darker orange pixels to the top of the legs where they angle back towards the viewer and into the light. The darker orange / brown was also used to suggest both segmentation on the arms and a hint of the orange colours in those areas of the original design.
I used a purple on the claws and feet to suggest the colours of the original design, but the colour I used is much lighter than that used by both surt and arne as the darker colour was affecting the shape of their sprites. I softened some of the black around the head while keeping the black adjacent to the eyes to make them stronger, and kept the black underneath the teeth. I then added 2 new colours, a lighter and a darker blue/grey which I used with the existing colours to use a small highlight on each shoulder and a soft one pixel highlight on each claw. In this way I tried to approach a balance between the flatness of Arne's versions, the soft shading of Surt's and my previous higher contrast versions. I also used the new mid-dark grey as a buffer colour for the shading on the shoulders, legs, to anti-alias slightly the top of the head and to emphasise the teeth. Because of the earlier decision to move the eyes one pixel down I had less space to play with for the rest of the head, and so I sacrificied the black line between the teeth I previously had used, while utilising a new teeth design which creates emphasis on that part of the sprite and looks more menacing to me than a 2 x 1 or 2 x 2 white square.
I tried a few different highlights on the head, but had the best results when keeping the head free of shading, which seemed to contrast more with the shading on the shoulders and worked better with the outline.
So overall the new sprite is clearer to 'see' in terms of shape than my previous versions, keeping that part of the design and the outline of the head as most important. While flatter then before in terms of shading it still has some highlighting and so is somewhere between surt's and arne's versions in this aspect. It keeps my tendency towards higher contrast (especially around the head), which might look a little artificial, but does keep the design more readable. In terms of volume it is more better than before thanks to arne and surt's designs and the colours are more subtle and less overpowering too.
Here is the new sprite:
I've tried to explain what I did and why, so.. what do you think? Is it an improvement, am I getting better?