brushfe - thanks so much for the detailed and well thought out feedback. It's really encouraging to have some people watching my project who actually want to see me achieve the best end product possible.
at one point in my design I was committed to keeping a strict 3 color palette, utilizing the black background for a fourth accentual color. one of the issues I of course ran into was how sprites were obscured when overlapping other elements. why does that matter? maybe because I was born in the 80's.. ha, but as the guys who made Odallus: The Dark Call pointed out, at times key sprites were able to utilize more colors using kind of an overlay technique.
I figured that was a good compromise, so that's maybe the direction some of my more important sprites are heading in right now (bosses, suit parts). I know it looks more 16 bit (and I'm glad you pointed that out), and I could still roll everything back if I decide that's not the visual direction I want to head in in order to tell this story.
I did spend a few days thinking about whether to include the shadow specifically on the player, or the highlight, and the highlight won out (for now). for his proportions, black would've added maybe too much contrast, and I felt that the highlights were just a bit more subtle and maybe made it easier to track the player on the screen.
any more thoughts that you have are totally welcome. I really take a lot of this into heavy consideration. thanks again!