Okay, more updates to the process....
If you have a feature that you want to really stand out by putting an outline around it (for instance one side of the spikes on the Hedgehog Bug get blurred together), here's what you do:
1. Add a new Freestyle line set to the Drawing render layer (Not the Outline render layer)
2. Set Edge Types, to Logical AND
3. Check Silhouette, Countour, Crease, and click the X next to Countour.
4. Set Stroke->Caps to Round
5. Set Thickness->Base Thickness to 4
6. Set Thickness to Outside
7. Set Color->Base Color to HSV 0, 0, .15
8. Add a Material modifier to the color. Set it to Color, Diffuse Color (note: this will make the inner outlines the same color as the Diffuse color of the material they are outlining. This modifier will not have the desired effect if your material uses a texture instead of a solid color. Personally, I think with such low resolution output, a texture is probably something that can be given up for the advantages of colored outlines)
9. Select all the edges that you may want to have the outline. For the hedghog bug, I selected all the edge loops that ran from the base of the spikes to the tips of the spikes.
Another update to the process. In order to better limit the number of shades (and get closer to a hand drawn feel to it), I changed the color ramp I used to increase the contrast. Here are the settings I used.
Switch the color ramp mode to Constant instead of Linear
Add enough stops so that you have 4 stops total. All of the stops will be shades of gray (H:0, S:0) and only the V will change. I will give the pos and V of each stop
1: .5, .25
2: .625, .5
3: .75, .75
4: .875, 1
This will give you 4 shades of whatever the diffuse color is. Adding more stops will give more shades. You can play with the spacing, but I think even works best, and you don't want to move any stops lower than .5 (unless you play with moving the lighting source).
Adding these changes, to my eyes at least, really makes it look like pixel art.
At this point, I think I have done all I can to get the renderer right. The rest is left to the quality of the model. I have attached the latest .blend.