So I really wanted the characters to pop from the background at this point, there might be a blending stage later on, but for right now I want the characters to feel like cell art on top of a painted background, so when the kids see it they will feel like they were there in the movie visiting our neighbor Totoro.
To achieve this look I refined my sketch and drew it in Illustrator.
I will, for something like this, just place the image on a layer in Illustrator and draw it out with the pen tool. When I have the outlines of the character I will usually copy and paste the shape behind and change it into a base color, the duplicate it again and erase what I don't need to create my low lights, more or less the same work flow I developed for ARCHER.
From here I am drop in the bus stop sign and the next thing I have on my list is finishing the design of my son's outfit for this piece.