Well, mermaids are supposed to be seductive by nature... least from the tales and such.
Anyways, I too much prefer the conditional-outlining(I'm going to call it that, because it changes due to the condition. For reference, I'm refering to the coloured outlining, not the black). I think black outlines are just way too harsh, and if you do want to keep them, drop darkness of it down a notch to a more near-midtone grey. In the original picture, the thing that stood out most is that it seemed you were going for a cartoony style, which the black outlines would fit. But then the outline of the hair and the arm was compeltely different.
I agree with what was said about the finsl. I think they're just way too large for such a lack of detail, and just stand out compared to the rest of the picture. I supposed you could either size them down a bit, or add some sort of texturing to it.
I'm also not sure about the dithering. You have dithered a lot of the picture, then didn't dither the rest. It really gives a clash of style to it, as some things like the tree are smooth and cartoony, then you have a more detailed rock, moss, and scales of the mermaid. That also goes with what I was saying about her tail.
I think the new face fits the purpose of the mermaid a lot more, and I don't think it makes her look like a bimbo. Though I think her left eye in the edit could use a move to the left a pixel.