This is a great example of why I prefer creating pixel art in Photoshop, especially for games. Check out Dan Fessler’s tutorial on HD index painting. It’s absolutely brilliant and really shows the versatility of the program.
The full tutorial can be found on Dan’s blog.
Dan is the former Art Director of Zynga and has worked for other game developers such as Gameloft and Glu Mobile. He is currently working as the Co-Founder and Art Director of indie developer Tilt Studios.
The dither brushes he uses can be downloaded here.