Shadows are highly inconsistent around the bed when compared to the shoes and lighting on the pillow. More than likely you simply didn't pay enough attention to where the light was coming from when you started to where you ended up as the image evolved. I suggest having a clear plan as far as how to light the scene before beginning to define its forms beyond flat colors.
I think your biggest problem lies in the confusion of using too many dark lines and adding 'dithering' at such a small resolution.
That said, you need to first clarify your forms based on their brightness. Instead of the current method you're working, you might instead start with a 2, 4, or 6 color depiction (not including transparency) of form+lighting -- in a grayscale of some sort -- so that you can have a clear idea of where the light, shadows, and transitions are, then put color to those forms later once your scene is defined. Not everyone works this way, but it's good method to practice sensibility in laying out a scene's colors well. The end result of this practice might easily look reminiscent of gameboy coloring essentially, but any colors would work -- as long as the contrast is correctly spaced between the colors in your ramp.
To clarify what I mean -- the difference I'm referring to in your method is equivalent to changing from drawing lines with a pencil to painting blobs of form and lighting with a paintbrush. In terms of pixels, these 'blobs' I refer to are the 'clusters' many people speak of here on pixelation.
To further that shading problem, the guy looks like he is sunk into the bed with a smear of dried milk or smth where his legs should be. This is because you're not thinking in forms and planes or lighting direction -- only "if I use a brighter color, it will look closer to the viewer" which is only true on a very specific lighting condition (i.e. from the top and front of a subject). Even in this condition, you still have to account for shadow cast onto the 3d form from other portions of the form (such as overhanging arms over the legs or whatnot).
Form aside however, you are also using straight greys -- add color to them (either red or blue) because grey is used in pixel art as a color that takes on the color of the surrounding pixels. Since the most-used color in your image is black lines, the greys really dilute any saturation you have in your scene, dulling the other colors way more than they already are.
