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I know Nothing about Paper Mario Style at all. (Except for the Dark Colors thing) So I need help with that. (I Just used Mario as reference) Not only that, The Sprite itself looks horrible anyway. Expecily the Quills. They look like mutated tentacles. I need help... XP

His legs look a little fat is what I'd say. The quills don't look as bad as they could be looking. I like how you're going for the old-schooled style.

'Course I don't know anything about PM style either, but I'm pretty sure that it uses a bit of anti-aliasing.

I've always wondered why his eyelids were tan in SA1&2, but blue everywhere else.

Make his legs a tad bit longer
Make his torso thiner and more round

Check here.

More hue shifts, Darker colors because thats PM style, and AA. And change that body shape.

You're trying too hard to fit paper mario anatomy, and you lost all the sonic anatomy in there.
Just because paper mario has no legs doesn't mean you can just forget sonic's legs. No legs isn't the style, it's the character.
The body is huge, that being why you had trouble fitting the spikes on there nicely.

Then you got to work on the shading, the spikes could use some of the 2 tone low contrast shading you see on a lot of large flat areas in PM sprites, the whole thing needs some AA, etc.

Okay, I Changed it a bit (The One on the bottom BTW) I Made his legs longer and thinner, Fixed his quills and shading, Rounded and shortened his belly, Attempted AA.

Actually, the colors have to be duller. There's hardly any bright colors on any of the character sprites in Paper Mario. That's the only reason why I don't like that game. The ONLY reason. Try the first color again, but add more contrast so that it's darker.

Good luck. If I ever thought somebody was going to get very far with making a Paper Sonic sprite sheet, I'd have started one. But I didn't, so I'd use Advance-style for everything Sonic-related instead. Not to be rude or anything, but...

Colors are dark enough, but too saturated. and a bit more contrast on the shadow is probably a good idea.

As far as anatomy goes, he's now got a fat Mario belly. You need a reference of Sonic so you can stop modeling him after Mario, they look nothing alike. Some of the Genesis era art should fit pretty well with the style.

He isn't that fat. Try and thin and round him out.

Everybody else said what was wrong in the sprite so here's some really really good advice: Don't run down your work so much....geez
I hear it all the time "I am new to this style, I sucks" "my sprite looks like it was thrown up by a hairy fat man"

If you run yourself or your work down to much, you will suck. You'll never get better because you'll keep using that excuse. Have confidence in yourself. :/

From what I have seen on the PM style is:

1. the ones with less animations get shading.
   
2. there are two pixels on the outline, only on the outside.
   
3. the colours are quite dull but saturation wise you have AA on the lines.
   
4. the eyes have to little rectangles (there are some exceptions but only a few).
   
5. and the anatomy depends on the character (like because Mario is a fat man, he has no legs, but for someone he is tall and slim he would have legs).

I hope this all helps =D

Fixed it up Even more. I'm not going to saw what I did because you can see it. I Really need to look at a picture of Classic Sonic for reference... This is all based off memory...

it hasn't got double pixels around the outside...

I started doing that, But Stopped cause the tail looked ugly like that. XP

Edit: There.