Update, I've been working on it more, and here's where it is now, about 75% to 80% in my opinion.
Colors: I actually liked the ideas of sunset colors, but they weren't working with the colors of the background. Easy fix, make the background have the colors of a late sunset.
Looks good to me.
Hair: still need to work with it. I personally like how it looks as of now, as compared to slightly more realistic edits, but I'll play with it more.
Well, as perhaps I demonstrated with my pair of tail edits, the thing that's truly important is that your 'abstract' rendering has a firm basis in the forms found in the more realistic rendering.
One guideline you could use, is to take a realistic rendering, and apply a gaussian blur. That's often what good relatively 'abstract' renderings look like.. a smoothed version of a realistic rendering, with some stylization and exaggeration to make it look more interesting
Water: started filling it in as a rough draft. At least now it actually looks like waves ^_^ wasn't able to get any good references, but looked through a few pictures I took down in Florida a while ago on a trip that had long stretches of the ocean in them, and kinda sorta figured out how they would work.
I think cyangmou's edit is on the right track. It really depends on the scale of the waves. What you have are quite big waves, when you consider the perspective is near a cloud. If the sea is not violent, you could flatten them out somewhat.
'Reference' material: Henk Nieborg's waves in lomax (complex and amazing), the ocean waves in Worms.
(I wasn't able to find any good real life reference material -- ideally you want motion video of the waves, to get a really good sense of it.. the closest I came was
r/WaterPorn, which contains a lot of awesome -static- images of water.)
Clouds: anti-aliased to my satisfaction, now.
Color count: 16 so far, by the end it'll be closer to 24 I think.
Thing I've been using to edit this: No, your guesses are wrong, Ai 
I've been using MS Paint. *backs off* please don't punch me 
though I'll definitely look into that piece of software you recommended.
On the contrary, you are clearly very dedicated. MS Paint doesn't make it easy for you
I don't agree with those people who say 'MS Paint is terrible, use a real pixel editor'. I mean, yes.. MS Paint -is- pretty terrible for most things, including pixel art, but I would prefer people to feel comfortable with changing to something more friendly on an experimental basis, rather than pressuring them -- you have been getting results with what you're using, it's just that with a better tool, you can spend more thinking time on the elements of the picture, and less getting the software to do what you want, which will get you to a better picture
Shading: worked on it a little, I'm going to play with it more to make it more pronounced.
Looks like you're headed in the right direction
Rainbow: I'm thinking about it. It looks like it would work well, but if I add it it's going to be a final addition. I'll fix/polish everything else first before going for bonus points 
Actually, that's another reason that Grafx2 might help -- you can put something like the rainbow on it's own layer, as long as you save as GIF. Then you have the possibility of doing a very rough rendering which you keep invisible most of the time until you finish the other things, for the purposes of ensuring its positioning and colors will work with the rest of the picture.
Been working on the anti-aliasing for 2 hours straight now.
I'm going to finish the water next. I'm getting very happy with where this is going.
Notice I still need to fiddle with the AA in some areas. I already notice I need to make the eyes a bit more crisp looking *shrugs*
Yeah, you blurred them. When AAing you need to keep in mind which edges are close and which are far, so you can vary the amount accordingly. Overall you did a great job with the AA though. There are only a few points that I need to clarify.
Here's a rather hands-on animated edit. I jammed everything I could into it..
* BTW, I edited the eyes and background cloud edges before I thought of doing the animation, so they don't change.
* If there's a sudden change in curvature, it may look 'ragged' if you don't give it plenty of AA (see the cloud area highlighted)
* Antialiasing 45-degree lines should be considered carefully. It can be used to enhance roundness, but only if placed carefully.. antialiasing immediately next to all of a 45-degree line segment creates banding (and mismatches the actual shape you're trying to describe, usually)
* Ending a 'sharp' point with an AA pixel tends to blunten it, rather than smoothing out its appearance. Generally to be avoided.
* When AAing diagonals that are not extreme in angle, try to think of them as a series of stacked 1-line diagonal gradients. That helps you avoid banding like on the leg (and generally looks spiffy)
* Varying AA amount according to the edge's relation to the lightsource, typically improves depth.
* A few things about representing tapering curves that the image itself adequately explains.
* A bit of banding was squashed.
* STUFF!
* (obvious cloud reflection wasn't included in the edit.)
Nice new clouds, btw
I think you accidentally mangled a color or something though, because a crunchy outline appeared on her mane and etc.
For cloud examples, try
r/SkyPorn/EDIT: I actually enjoy the old style clouds (esp. their Chinese aesthetic), but the new ones are undeniably more integrated. Maybe you can get some idea for lighting from this:
, an edit I just quickly messed around with that ended up surprisingly fascinating. ( I think I reversed the lighting somewhat though, unintentionally.)
