Yes, it needs some AA on the arms. If you tell me about this and haven't read this description, the above guy will hunt you down.
It was inspired by Mammon Machine on Chrono Trigger, so I can see how it reminds you of the 16-bit era. The pillow shading came about of my inexperience of lighting metallic surfaces.
I like it the way it is. Reminds me of old 16-bit RPG enemies...
Pillow shading much? :| Try using dithering to make the shadings smooth instead, rather than like 6 colors just for the shadings. Looks pretty nice other than the shadings.