That female character looks like he's bending over because she's missing her belly area, looks like some messed up foreshortening.

Her arms could also use some work.  Right now it looks like someone attached a pair of legs to her shoulders.  I can clearly make out knees, calves and feet.  And they're too short.  A normal person should have arms just long enough to touch their own crotch without bending over.

I toned down the green tongue, got rid of the blushes, moved the whole head down a bit and moved the eyes and mouth around a bit.  Looking over some "cute" drawings I found that noses are not cute so I wont paint a nose on.  The ears were a bit inspired by the Gimp mascot, Wilbur.

The blue hair needs to transition a little better with the brown fur.  Right now it looks like the hair was cut from another picture and pasted here.  And why did you use blue to define it's teeth instead of the dark brown you used for the whiskers?

The teeth also seem a bit pillow shaded, they need a more defined light source and highlights that contour to their shape.

You did really nicely with the texture in the fur, though.

I'll have to practice with AA some more.  As you can see, I already tried some AA in the eye slits, am I doing it right?  I was afraid to AA the entire outline without a little more practice.

I did get lazy with the arms.  I usually draw both arms even if one is covering the other and then erase unwanted lines later so from what you can see of the obscured arm doesn't look deformed.  I guess I'll just have to redraw the arms.  The lazy artist really does end up working the hardest.

I can't see what's grotesque about this, but this isn't the first picture I've drawn that's been called weird, or surreal ever since I changed my style.  I'm just really trying to master the "cute" style that's so popular right now, but I just can't see what I'm doing that weirds people out.