It's been a long, long time since I've done this but here's my go.

What gives this little guy character is his disproportionately large head. Really push yourself to make it cartoonishly large and as long as you do that I think the essence of the alien will come through.

Some other things I'd focus on are the roundness of his body/hips, the wideness of the eyes, and the low placement of the arms. There's probably not enough room to represent them like in the picture, so maybe just have them splayed outwards?

Edit: On second thought, the highlights on the head are probably unnecessary.

Don't forget it can also be found at Base.rte/palette.bmp

I feel like the outline is a tad too dark. Maybe use some more reads and browns. Or make the outline contrast less.

A dark outline works well with your other, darker, stuff but here i feel it sticks out too much and takes away from the sprite as a whole.

Just my thoughts