I agree the colors are in the right area but because the palette does not have enough definition/contrast it leads to a harder read.
Oh dear, it's not meant to be her mouth, rather it's her hair from behind. 
She's meant to be holding a bag too. I see what you mean about readability, haha! I gotta practice more. Thanks for your critique.
Colors are mostly all right =) I'd question the grey, which is too bright to either be used for shading or AA. The 2 medium purples might be too close.
The problem with this piece is readability. It took me a while to see the hands (and only zoomed in), and I don't know what she's holding: a mug and key?
Also wherever too many single pixels are used looks messy and undefined, the legs mostly.
At this very small scale, you have to simplify to the extreme. A bright 2x2 square would probably make an acceptable hand. Waste no space for outlines ;)
The anim doesn't bring much I think. It's not clear why the mouth changes.
There is a tricky situation with faces like that. Every person in their brain has really advanced 'face recognition software' so anything that looks passably like 2 eyes and a mouth with read that way. I had the same problem with one of my pictures in the gallery. I wanted her to have 2 eyes and a 2 pixel line under it as a nose, but I soon realized it was literally impossible for anyone to read it as anything other than a mouth.
Anyway, very nice little character.