Thanks thebestcpu.
I tried your second approach. It looks better for sure, but in particular, the colors table you mentioned is something that caught my eye. It looks like there is an option in PS for indexing colors (Image > Mode > Indexed Color).
After picking Local (Selective) and 39 colors with transparency enabled, I got this:
[ATTACH=full]117440[/ATTACH]
It "looks" blurred but when you zoom in, its actually aliased and when I count the colors in PaintShop, I get 39 colors (against the 1866 colors of the anti-aliased image).
I'm just curious if you had some thoughts on this; lets say I have an original aliased imaged and its color palette, and I distort it a bit via transforming. Would it be possible to achieve this result but while simultaneously ensuring that PS doesn't remove colors from a given palette, and avoids adding additional colors, essentially restricting it to the original color palette I supply to it (the palette would be of the original aliased image)?
For example, in the original image, there is a shade of orange in the left mushroom highlighted in the image below:
[ATTACH=full]117441[/ATTACH]
In the Indexed Color result, this shade of orange is missing (along with a few other colors), while PS appears to add a few colors, noticeably to the leaf on the bottom left which gives it the blurry feel:
[ATTACH=full]117442[/ATTACH]
Basically, is there a way for PS to "force" the results into a color palette belonging to an original aliased image? I know we have the option of transforming using the nearest neighbor setting, but that distorts things quite a bit. Transforming an image with the other options then applying such a technique would I think give the best results.
In any case, thanks for all your input thus far! Results are definitely close to perfection.