Frankly, I believe otherwise. I liked the earlier version much better.
My two cents on the value/hue-shifting discussion: The darkest color doesn't have to be completely shifted, and furthermore, values don't have to be adjusted to correspond to that. In fact, I believe hue-shifting should never be overused unless you're doing some kind of extreme palette stylization thing, which I imagine is hard to pull off without looking unnatural/overdone.
The latest version may have taken certain suggestions into account, but it also may have taken them too far. These changes also make the pillow shading more obvious. By all means, try to avoid this. And banding as well. Avoid both of them.

Mine next to yours for comparison.
Granted, this edit does look a bit less cute and cuddly and more realistic than what was, perhaps, originally intended. As long as the values are good and the direction of the light source/original drawing are clear, feel free to choose any style you want.
Note I'm not using outlines, but the forms the outlines suggest to shade the character. You're off to a good start (sphere for the body and eyes, tubes for legs, etc.), so you know what I mean. The lines around the mouth are ridges, for example; then I imagine how light falls on them when coming from a single direction. And remember, keep the
general forms in mind. Don't disregard them when working onto details. Another thing to remember is to keep lights separated from darks (thanks EC!). It's a bit hard to describe, but one example: the tail's lighting, or the way the lightest color grows darker towards the outlines so that it appears pillow-shaded, are examples of what not to do.
Other things I forgot to mention: added a dim secondary light. It could well be light reflected from a sky (game character, jumping over a pit to oblivion?), or just from a bright surface. Either way, once noticed it makes things more interesting IMO.
Made the farthest foot smaller to emulate perspective distortion, and adjusted the size of the monster's right eyeball. And, by the way, watch the saturation on those mouth/pink colors. They seem to pop out too much.