I'm trying to make a portrait mod for Starew Valley. So I researched the size of the portrait, and it is (I believe) to be 64x64... this is my first portrait, and stuck in this progress...

I'm still confused about AA, when drawing pixel art, is the color to do the AA is manually picked or using blur/smudge tool?

Edit : here's what I came out with so far

Colours are usually manually picked. There are some automatic tools to help with that, but in the end, artists often tweak even those to get the look they want.

Instead of worrying about AA, try to get your portrait to a good state without it. AA should be something you do later, when you're happy with the colours and forms you've created. That way, you'll know exactly which colours you need to blend between and won't have to re-pick your AA colours at a later point, and you'll probably also already have some colours in your image you can use for AA without picking new ones.