I almost never use dithering on smaller pieces at all, for a couple reasons.
1st is because it takes at least a 2x2 area of dither for it to work right, and on small sprites and the like, that space is better used for adding specific details.
2nd is because dithering often looks really weird in animations.
I'd suggest adding some folds in the robes of the ice mage to replace the dithering. There are also quite a few wasted colors, that is, colors that are so close together that you can't really tell that it's not a single color. As for the fire, I would suggest doing a google image search for "fire" and learn as much as you can about how fire looks.