i'd say it's a combination tracedown/redrawing with colors selected from the original, but replaced.  reason is the mouth and eye borders, few people would intentionally pick those colors because on a low res, they work poorly.

Don't think it color reduced or scaled - eyes are the same, there are not much pixels that might be clasified as artifacts and previous artwork looks pixelled from scratch. But then for such masterful colors and style outline seems too jaggy.