River City Ransom is easily one of my favorite games to date. The one for DS could've offered better graphics but didn't. Shame.
If you don't want to make him look blocky then I suggest you change the pose entirely. Don't mimic their cramped pose, it worked on NES but you don't have the same restrictions of size or color.
Play with the poses because the body language is important. I can live with the funky anatomy, but the pose needs reworking. I'll try to make an edit of alternatives.
I think the color can use a little more contrast and minor hue shifting, those straight ramps are boring. Play around a little more, then please post whatever you've concocted.