I think the characters are charming.
Working that small means you have to imply shapes rather than explicitly pixel them. I'm not that good at it myself, so I don't have many suggestions on how to do this.
Avoid noise. Use single pixel stubs only with much caution.
Edit (only the small figures).

For the female, only down to the shoulders. There's not enough room to waste a pixel to outline the jaw, so I just used a darker shade on the neck. Trimmed the hair a bit, added some pixels to the near shoulder to show that it is in front of the body - the saved pixel from the jawline came in handy here. Oh, and lengthened her arms - they were too short by a lot.
Here I used as single pixel stub for the base of the neck to hint at form (neck/collar bones). The face is a much simpler design, and she looks a bit like a smiley face, but it works ok, because that's what people recognize as a face.
The male suffered from the dread hunch. His chest is caved in. If this a hero, have him stand up straight and push out his manly chest. This goofs up his arm a bit and I didn't correct that, but the basic stance looks more bold.
For both figures I used a 4th color (light brown) with the skin tones. I find 4 colors is the minimum I can use for skin. Others can do it with three, but I generally can't. I also bumped up the saturation on the red skin tone to separate it from the newly used light brown.
edit: on arms,
look at your arms as a reference for dimensions. When held straight down, elbows come down to around the bottom of the rib cage and wrists are almost the groin. Keeping the elbow in it's place relative to arm length is more important than overall length. For the muscles and whatnot, I recommend an anatomy book.
Hope this helps,
Tourist