Wow, that really looks good already. It took quite a moment to see the actual 3d model of the leather girl in the bar. Nice! Can't wait for that dither/pixelisation filter. 
Well I think it's still quite obvious due to missing details. It seems like there is not much to do left, though painting on normal maps will be incredible feet. Converting height maps might be a little easier for artists, good thing there are tons of filters for commonly used software (like photoshop).
I don't really think sprite resolution is as big deal as you make it, since sprites are pretty much 1:1 (I don't really think there is any resizing going on), any higher resolution screens were already unaffected by "pixelization", so unless you have fullscreen window set on low resolution, or you like to zoom in, you will not really have chance to notice any differences in this regard.
On the other hand additional colors are much easier to notice. Unfortunately it is much harder to work around them, because dithering is not as simple as indexed color lookup (which would really just look like shit, so I guess it is out of question).
Also Luther, it is not possible to add additional layers to model texture? It looks kinda wrong when you model this kind of details?
If not such system should be designed and added :d. It'd just save everyone tons of work, and to be honest some of the MMORPG games build skins like that.
Anyway I think the biggest challenge would be to correct bad meshes and textures. For example the hobo rags looks much better than the previously mentioned coat, because it has much better painted texture. Where the coat is just blurred something.
Not sure whether such things are better done with normal / specular maps (letting the engine shadow / highlight deal with it) or whether they should be painted onto the texture.
Later will look good from one angle only.
