@KaliYuga did - she got hired by StabilityAI just a few days ago. Here is a link to the Pixel Art Diffusion notebook:

https://colab.research.google.com/github/KaliYuga-ai/Pixel-A...

Check out NUWA-Infinity[0][1], submitted to arxiv jul 20, 2022. It captures artistic style very well (though can't speak to the quality of the pixel art it would generate) and can do image to video.

[0] https://nuwa-infinity.microsoft.com/#/ [1] https://arxiv.org/abs/2207.09814

You can use DALL-E and other models to make pixel art ("as pixel art"), although it can both be overkill and hard to get consistent results that you'd put into animation. I'm guessing that starting from more of a video model and then converting to pixel art could be better. Although it's also non-trivial to turn "realistic" video into convincing animation.

hi there. we're working on this, been working on a model for months now. hope to release something soon. how best to get in touch with you?

That's a really good idea.

This is exactly the type of application I am interested in as well. As a hobby game dev with only mediocre pixel art skills, having a generator to finish the busy work would be an absolute lifesaver. I'm also interested in using it for fleshing out artistic vision through generating variations of an initial concept.

Hopefully we aren't more than a few years away from something practical like this.