The more expressive the character (ie less symbolic and abstract) the more likely usual limitation will be seen. Animation like earthworm jim or genesis aladdin always bug me out because they had the same slippery and repetitiveness that usual game animation, their walking animation is not grounded, and feel generic because of the shifting context, they look like they will react but never does. It does not happen with sprite like megaman because the style never clash with the function.

BTW mario and megaman are awesome because
they strike the perfect balance between limitation, form and function. They have just the right amount of expressivity and it's not that easy to acheive (especially in a time were there was no reference). The one frame jump "animation" is no small feat, because it must look right despite having only one frame: it must look right as the sprite ascend and descend, and its must convey the right feedback about collision. I did tried to do thing like that, it's craft, and it takes skills, time and energy to achieve.

No wonder they are timeless

Neo, after talking about this with someone, and rereading your post this morning, I do think you have a really good point. Although, I am not bugged out by animation like EWJ's or Aladdin, (I obviously really like it!) I do agree that, especially with low resolution pixel art, there is a careful blend of, as you put it: limitation, form and function. There is an art to making really good, yet simple, animations. And you can convey plenty about a character in this way. I actually remember hearing or reading that the Disney guys who worked on Genesis Aladdin were really bugged out that you could change the direction of your jump midway through. It took them a few tries to find a workable solution that didn't look silly in the game. I think it is interesting to see how they tackled this problem, but it doesn't make the Mega Man solution any less valid.
I do think that even traditional pixel art can benefit a bunch from the same squash and stretch principles though. Fez has terrific animation, and Gomez would look right at home next to a Mega Man sprite. Check out at ~0:30 when he picks up the bomb! Crazy cool looking:
http://www.youtube.com/watch?v=-H54u4VmDFc&feature=relatedGomez has a nice kind of squishy-ness to him. I also really enjoy the way the fez itself pops off his head at various times. And of course, Paul Robertson's work is extremely lively and uses many traditional animation techniques, but still looks very much like game pixel art.
I didn't mean to start this thread to bash any kind of game art, rather, to inspire people to really learn from some really great animation outside of the field of games. I know I get in the habit of just selecting an arm or whatever, and hitting Ctrl-R and rotating it, without thinking about how an arm actually swings in 3D space. Here is a walk animation I did recently:

The animation might look kind of nice in stills, but the arms are *really* stiff looking. They only rotate in one dimension, and it makes the sprite look very robotic. Check out the hands too - they never move, and end up looking strange because of it. (Not to mention they are probably not posed correctly to begin with.) The body itself is absurdly stiff too. The spine looks locked in place.
Contrast that with this, which is a polished up version of my Aladdin run study:

I think this give a much smoother, more natural result. I was especially surprised when I drew the arms, at how much they cross over the body! I'm not sure I would have ever pushed the fore-shortening of the arms like this before studying the Aladdin run. (The hair is jumping pretty badly though... yikes!)
And of course, doing an entire game like this would take huge amounts of time. I'm not going to lie, this was pretty labor intensive. I think on games with small teams it is more important to have functional art and you know, actually finish the game.
