Yeah, the palette thing should work very well for keeping track of which colors to be using. As for a jigglypuff being one huge head, I didn't design that pokemon and apparently that is what is considered anatomically correct for a jigglypuff. I was more talking about people on the overworld and how many artists choose to render their heads larger than usual. It's nothing really.
I added the shading to your guy and then added some clothes to give you a nice example. Turns out that the head wasn't so big after I put hair on top of it. Top-down perspective can really mess with your perception of things.
it definitely is only a medium-quality shading and clothes job (the pants shading is terribly off...), but it should be good enough to get the point across. When clothing your naked sprites, remember that unless they're supposed to be wearing particularly skintight clothing, make the clothes' outline go past the main outline. And if your drawing program lets you use layers, use them. I put all of my clothing items on the same layer because they don't really overlap too much.
What I'd like you to do is try to shade and clothe your guy using my example as a guide. Notice the differences and similarities in the two and feel free to experiment with things like poofy pants, different hair styles, armor, assorted accessories, and maybe even fancy capes! And in the particular color scheme that went with, don't be afraid to have harshly contrasting shades. You can see a good example of this with the hair.