Aye, that's certainly true, but you don't always have to strive for realism with those kinds of things.
Case in point, in older movies they used (and may still use!) milk for more "visible" rain on camera, to achieve the heavy rain effect. For example, that t-rex scene from jurassic park used that technique to create visibly oppressive, stormy weather.

If you want to avoid that sort of thing though, it may be better to remove the lines of water you have overlayed on the picture in favor of some water droplets on the "lens" of the camera. As they are now it feels more like you're going for the idea of rain rather than a straight representation of it, and I was suggesting based on that.

And while water may not have so much visibility while FALLING (unless it gets absolutely torrential, as seen here http://images2.sina.com/english/china/p/2008/0825/U99P200T1D181645F12DT20080825181053.jpg, where it becomes a sort of thin haze), most of the time you can definitely see it when it splashes against the ground and in pools of water! Also, there's still a lot of spots where the rain would be hitting that aren't just the pointy bits of the houses.
 It'd be splashing down on all parts of the roofs, like that little overhang on the right or bouncing off the knight's armor!

As a side note, I'd also recommend some clouds for the sky to make it more clear it's weather and add some visual interest to the sky, you can probably achieve that with a mono-or-near-monotone slightly-darker shade(s) of grey to keep it from overpowering the foreground focus.

Redraw everything below the waist, from the belly down everything goes really chunky while the top has that slender elegant elf look to it.
Hips are also way too low.

That looks perfect as is, the extra tuft was definitely too much.
As for drawing over the front sprite, that seems the best way to keep things consistant yeah

As u can see above, i made a "bad" animation of a katana attack. He he, i am not an experienced artist, still learning as a 16er, but i participate in a project and i struggle to make a katana attack that looks good. The arm movement is the worst part , i made the movement myself with a wood sword but i couldn't found a way to make that animation looks good.
Any suggestions and opinions are welcomed,
Thx

Well, probably most importantly here is that you're mixing resolutions. Redo the sprite at it's original res, or do the whole sprite at the higher resolution. Doing both gives it an unnatural look.