Now comes the retouching part.
On the right you can see the layer setup I ended up with. Let me explain the main parts of it, starting from the top.
The Additional layer contains stuff not coming from Modo. In this case that’s two smoke puffs, made with one of my FilterForge filters.
The collapsed White group contains half of the objects. The structure inside is exactly the same as in the expanded Black group, only the data is different.
At the bottom of the Black group is the image rendered in Modo. It’s all right, but too “renderish”, lacks the style of classic pixel art. To make the tiles look more like that, let’s make a black outline around the tiles.
Duplicate this layer (that’s the Outline), and use the Threshold operation with a value of 1..3. This makes all non black pixels totally white. (If you have black inside a tile you have to clean that up manually.)
In the Canvas size dialog, increase the canvas size by 1 pixel on each side. (Make sure the background is transparency, not a color.)
Now if we apply erode (minimum filter) twice, we are going to have a black outline sneaking in at the edge of the texture as well.
By separating the objects earlier, we made sure that even tiles covering the whole cell get an outline from all sides. Set the layer’s blending mode to multiply.
Repeat these steps at the other group as well, and then crop the image back to its original size. To do that select all, contract the selection by 1 pixel, select the crop tool, and click on the Crop to current selection button.
Almost done. The outline may look very aliased, but downscaling the image will take care of it. Unfortunately that will also cause some bleeding around tiles which extend to the borders of their cell. To prevent that we put the Render and Outline layers into a group, and apply a checkerboard texture to it as a mask. The same goes to the White group, only the checkerboard is inverted.
We are pretty much done. You may want to experiment with Edge preserving smooth and Sharpen, if you feel the image is too CG like and/or too blurry.