Indexed palette, GG does it too.

He means GraphicsGale, which should be easily found through Google. (And I use it too )

I would avoid starting in full color and downsizing to a smaller palette. Just start with a small indexed palette and add colors as you need them. Or, as an alternative, you can reduce what you have to an indexed palette and adjust the greyscale values. Or something.

If you have a pixeling program with a good, manageable palette system, do noT create a predefined palette with a range of values that will likely turn boring.
Instead, the best approach is to define the palette as you go. This way, you get fresh, nice colors the way you want them. If you are concerned about using too many, just make sure you reuse the colors you've already defined.

I looks good but as you say but tiled. Have you considered using more than one tile for your grass? Critism for looking like SoM? Eh... damn. Rough crowd or what?

Yeah. Personally, I love SoM tilesets et al., but it's understandable why many people criticize it. It's not original. It's been done COUNTLESS of times before (no less thanks to the tut on zoggles...)
It's really nice looking, but we love originality here. And Secret of Mana is not original... anymore.

1. How do you find the value between the two pixels you're trying to AA? I couldn't figure out a method, so I cheated. I made a new 6x6 document in photoshop and dropped the two, sometimes three pixels I was trying to AA and applied a Gaussian Blur. That produced a number of shades to choose from which I color-picked and used in the original piece of art. It smacks of cheesy cheating to me, so is there a better way? Or do you just eye-ball it? Heh.

Usually, AA is done at the end of the creation of a piece, as a sort of polish. Or at least that's how I do it, but it depends. If you want to be really indepth with the AA-ing, you might consider adding a few shades, but in most cases, the shades for the shadows, midtones, and highlights should suffice for AAing.
Also, there is not a good technical method in doing AA. I just eye-ball it. In fact, I strongly ENCOURAGE eyeballing it. It helps develop your sense of color. And also, in conserving colors, it is often fun, if not useful, to AA using a color that would not seem to bode well in AAing. Colors to be AAed don't PERFECTLY have to be a shade between the two said colors, but as long as it's not entirely infeasible, it may be used, depending on the situation.

2. Again, NOT used to working with color--I'm used to drawing black lines and dots. So my question is what some techniques I can use to create depth? In illustration, all I have to do is draw the perspective and shade appropriately. Color is trickier and I can't wrap my artist's brain around it. I don't seem to have this problem with flesh tones/facial features, but artificial forms like this octo-head are giving me trouble. I'd like to give the illusion of one or two tentacles projecting forward and one or two falling backward. Ideas?

How Capcom does their fighter sprites, they use darker shades to create the illusion of a farther arm/leg, and lighter shades to bring it closer. This isn't entirely technically correct, but it works (and I do it...). Really, it's the level of detail and size relevant that should be bringing objects closer. A closer object would have a more defined texture, larger features, etc, from the perspective, than the farther.
An answer to CrumbBread's statement: I think it was Dhaos in a color choosing thread by Faktablad... anyways, that's a really good thread for checking out color choosing. Anyways, it's not always true, but generally, I suppose these are not bad assertions. Really depends on the different lighting and objects there to reflect the lighting to create other ambient light sources. There was this really great pixel school thread where we sorta went offtopic into light and ambience and color theory... it was really cool too.

Yeah, that's what I got. Have fun with your stay in this community. (OT: I will get to that piece I'm supposed to be doing, really!)

Bo is all promises and no tile. When will his tile be free again?

Give him a chance

Anyways, I just want to mention that this, is... wow, some work. The detail + all the styles melding into this melting pot of an isometric work. I wish I would've joined earlier, but, meh.

I suggest you get your pixelling skills down before you attempt animation. Right now, the character itself is lacking many fundamental aspects, and once you get down anatomy, shading, etc, animation should be much easier to understand and correct.
Good luck.