If Im working on a higher resolution piece, I usually scan it in at some ungodly resolution, use illustrator (or some other close analog, I recommend a program called pencil if your lookin for something free and easy that will do the job,) trace all the lines with vectors, then take just the vectors, downscale them to whatever the final size will be, turn off anti aliasing, and save it as a png, then go through and make minor adjustments to the lines on a pixel by pixel basis, and proceed to shade with the pencil and fill tools. I think the end result of that is still pixel art, as even though at one point or another I was tracing, and at one point or another it was in vectors, it still ends up as the same thing.
That being said, You really cant get away with using things like value blending, as you just dont have the right amount of control over the colors you use. Your piece has an ungodly amount of almost identical shades of any given color, but it does nothing to create depth, and although you CAN do that with value blending and setting the contrasts of the colors correctly (way higher, in your case, as it looks flat,) you will still end up with an unnecessary amount of extra shades being used, and far less control over the overall product.
In other words, there is a happy medium between placing every pixel by hand at 800% zoom in msPaint, and working from drawings (or even stock photo's, I guess...) and at times, it is simply not feasible to do everything by hand (Like say, if you are actually working on a game, and need hundreds of different sprites with a variety of animations, or are working on a large piece,) my way is by no means the correct one, but working with a bunch of fancy shading tools will ultimately be more of a handicap then an advantage.
>_>... Id also look here ->
http://www.petesqbsite.com/sections/tutorials/tuts/tsugumo/Oh, and hopefully this wont start a flame war, Im pretty sure I made 1ups list myself.
