Getting rid of the blue, Blanket Octopus are more red or a creamy orange.

Haven't completely updated my palette yet, and quiet a few things are still rough. but things are a bit better.
[EDIT]
My thoughts right now is that I need some type of texture to her skin. Blanket Octopus are fairly smooth though with just minor skin color changes based on light penetrating water. I'm going to have to build a scene for her I think.
[Edit][Edit]
 yrizoud: I'm stealing your hands bro, I just couldn't come up with something that fit as well as yours did, I'll change them if you object.

Not sure how to shade her cloak thingies. >.>

Second one is way better.
The first one could probably be re-purposed as a clay or gravel though. 

Double post!

Starting to refine things a bit more, working my way down bit by bit.

Any thoughts on composition? Palette?

Hands are still bad, but using yrizoud's example i'll refine them down more.

[EDIT] - Late night thoughts

I think she is too plain, too human. Gonna try to add some tentacles tomorrow.
I also want to incorporate her clothes into her skin, like Nami from league of legends. Make things look more organic.
I also need to add a few more shades to her skin colour I think.

Yo, working on some stuff. One thing that has evaded me are tips for doing fingers at a fairly low resolution.
i.e ala this size:


Ignoring some of the other stuff I need to clean up, the major problem i'm having is getting a decent looking set of hands going on. Or at least an impression of such, looking around I can't find many examples or even tutorials.

[EDIT]
Re-reading this I decided more context would be needed. I drew the outline of the character using this pose on posemaniacs.com
The inspiration for the color of the skin, the head and a few other things comes from images of the blanket octopus.
I'm trying to get the hands splayed out in such a way that part of the "cape" from the blanket octopus is attached to the pinky and the back of the arms, and flows out or down.

Tried to incorporate your suggestion, best color I could find for the inside of the shield was flat black. Now i'm running into a perspective problem with the shield.
Also his whole left side blends to much with the right I think, so I made it lighter, but now it doesn't match the lighting with the rest of the area. Small sprites is hard yo.
His arms are also a bit to long, but I kinda like them.



Overall though I am much happier with it. I'd like to animate it, but I think that is way beyond my skills right now. Maybe I should just commission someone to animate it for me.