The leg animation is nice.
But before you get concerned about the bobbing do as others have suggested and work up the arms.
You're absolutley spot on by trying to locate the hips, and you'll notice they're rocking back and forth this is perfect. But what you need now is the arms, working in opposites to the legs, with the shoulders roacking forward and back wards in opposition to the hips... then worry about the torso...
This method of constructing an animation is absolutly fine, it's one of a few methods. But, you need to be aware of how all the motion of the other elements effects the overall look of the others... The arm swings effect the legs, and both effect the 'twist' and 'bob' of the torso, which in turn effect the motion of the head... Remember, the head also moves forwards and backwards as well as up and down and rotates too... all of these movements working in opposites to everything else in order to keep the thing balance.
Right now, the edit that robotcon has made withe the head spliced on the neck is just showing the 'bob' - you could have a twist, and a rocking motion too...
What I've done in the past is create 3 head variants - one looking slightly out of the screen, one looking slightly in to the screen and the other looking straight ahead. This gives you the option to have the character swinging his head from left to right in opposition to the shoulders. For example, if the right arm is forwards, the head will be turned towards that arm (looking right) - this creates a TWIST motion that helps to accentuaten the whole of the upper rotation of the torso. It works, trust me. (this is evident in the PACMAN run loop in my sig - [and pacman doesn't even have a torso])
Another thing to help with this is the position of the head forewards and backwards. When the legs are at the furthest extreme apart (the contact pose) then the head will be at it's most fowards and down... inversely, when the legs on the crossover point (this is when the torso can be at it's highest) then the head will be at it's highest and furthest back. Obviously with all the relevant tweens in between.
- I've dug this up from one of my old posts to try and show you this is in action.
One final point, what I've explained is one way of doing a walk loop. There's been some discussion on this thread about head bobbing, and torso's moving up and down and so on... but you can break these rules to create other interesting walks... There's the 'double bounce' walk for instance that gives a nice jaunty feel... there's also a fun trick you can do by inverting the head height to opposite to what I've described, so that the head is Higher on the extreme (contact) frame and lowest on the crossover... it's a peculiar motion but nice all the same...
There's a great section on animating walk loops in the book I mention a lot in my signature...
Don't worry, the head will bob with the body, and have arms. I just wanted to fix up the legs and torso first, otherwise there'd be ALOT of redrawing in the near future.
Oh, and If you're worried about redrawing then you're in the wrong game... animation is all about redrawing... especially using this method as you'll discover - it's like sketching... you can't work on one section of a still life till it's finished and then move on to another until that's finshed and another and so on - because everything relates to everything else... what you'll end up with is something that incohesive... Point being, you have to rework it as new elements are processed and rendered because they WILL effect the rest... it's the nature of this medium.