I agree with the comments below about the desaturation mostly working - but I wonder whether Sonic himself might stand out more if he was slightly brighter (maybe even using pure #FFFFFF white!)
the pallete brings new life into this scene. I don't know if there is enough contrast to warrant the use of both light blues in the same highlights for the water, however. perhaps having some clusters of one light blue and some of the other? overall I am a fan of the design of this and I would be interested to see a whole sonic game in this style
Digging the more washed out colors compared to Sonic's more iconic high saturation/high contrast ones.
Yes, this is something I asked feedback for in the forums. My first version had almost no contrast between foreground and background.
With the feedback I added some contrast so that the scene had more volume, but I did not think about making the character out stand more, which for a game is quite important.