I used this method for a couple of effects for a game. Probably shouldn't show them but I can show my first attempt at
an explosion which didn't really turn out, it has a lot more dithering than it probably should but only cause I did some last minute resizing and recolouring in photoshop in an attempt to save it. The method gelled pretty nicely with photoshop animation, I just ended up putting all of the frame layers into a group and clipping the adjustments to that.
I'll have to play with it some more to see how it goes for still images but for effect animation it was insanely useful since the amount of time you can put into a single frame wouldn't usually bring it anywhere near that level of detail and the pixel level care would probably be just as sloppy. Just being able to really integrate all of the photoshop tools into the workflow makes the job a hell of a lot easier, custom brushes and intuitive colour control makes rough work a breeze and gets you a lot closer to the finish line than a normal colour reduced painting would.
I see myself using this a fair bit in the future, thanks for sharing
