Ah, "Friendship is Magic". Anyway,

I'd draw more of the heads from 3/4ths or the side. When they're straight on like that they do tend to look rounder and I could see someone mistaking them for a cat or some other animal. Anti-aliasing would help a little, but I think some stronger contrast in your color choices would help.

- The light brown line gives everything a subtle embossed look. This is because there's also a black outline. If it was just the light brown line it would be somewhat similar to sel-out (scroll down till you find the section).
- The plants don't need to be darker, check this out,

If you notice the plants, they're thicker and instead of using blacks they simply have darker greens in the shadowy areas. Plants usually are small in pixel art, and putting a black outline around them would make them stand out (and they're already a little bit dark.) So using dark/desaturated greens will allow you to give the plants volume and form without having to use black pixels. Visually your eye will combine them.
- Dithering is fine, you just need to use dithering elsewhere instead of just one place.
- Zoom in on the same trees in that image to get an idea of what I mean about using purple (or blue.) Actually, you might be better off using a very dark saturated brown or maroon (similar to how the grass is done.)

Maybe just throw the light-yellow green color in there instead of the pale green. Also consider adding a shaft of light shining on the sword maybe.

Those edits actually make things a lot better. I tried to go in a different direction as much as I could but it's hard at such a small size. I did do some work with the arms and rounded out the faces slightly.

Thanks michelcote

I worked on them a bit more last night too, and just tried getting rid of some of the banding and adding a little more detail. Those eyes were pretty wonky too
(That's what I get for copying Akihiko Yoshida )

Here's what I got (also tried making a female too because I'm a glutton for punishment.)