Hi, stoven. This is a pretty wonderful sprite. I think there's a few problems, though. Here's my edit

It seems to me you hug your lineart too much with the available shades you've got, especially on 45 degree diagonals. This not only creates banding, it also makes everything blurry looking and indistinct. A fighter sprite should have some edges, right?
The second frame of the animation is a circling of a lot of places where there's banding for you to inspect in your pixel app of choice. I've written
extensively on banding and I don't know if you're aware of the concept and to what degree. There's a lot of ways to remove banding, most of them rely on *doubling* the antialias, or *removing* the antialias. Before you look at how I solved the problems, I suggest you take a stab yourself and then compare with my solutions.
There's a few other things I dealt with. On the pants, I don't know what type of material you were going for but I found that removing some contrast and the pillowhuggy lighter shade helped a lot. I don't think you need more highlights than those in the pants. I added a color in the shirt instead, which I felt was sorely missing.
On the skin color before you shout 'oh this helm and his constant tinting', there's a reason I did the tint. I've found in a lot of film that people with dark skin tend to get desaturated teal/grey highlights.

I thought it was worth a try.
A lot of your highlights on the arms don't follow the shapes they belong to, they instead look like large, indistinct speculars. And because you hug the single pixel with a square's worth of antialias, you end up with banded highlights.
A lot of my critique is based on that this is a showcase piece as it is, not animated, not in a game. In a game situation the eye probably won't have enough time to be bothered by a lot of the things I critique, but I'm not sure that's a good enough reason to disregard the issues anyway.
Hope I helped.
edit: as far as the foreward arm looking off, I used this reference

to do this
