Colour logo of a picture - the face colours seems washed out....kind of ugly close up but is not noticeable far away..any tips?

[SkyBo]

Colour logo of a picture - the face colours seems washed out....kind
of ugly close up but is not noticeable far away..any tips?

i shrinked a picture to 80x128 and i converted it to 256 colours.
this all done with paint shop pro 7
when i was decreasing the colour depth i chose reduce colour bleeding
and the reduction method i chose was error diffusion, the other option
would be nearest colour.

i can only pick reduce colour bleeding if i choose error diffusion, so
i guess thast probalby better than nearest colour right?

On the pallete part during the decrease colour depth box i can choose
optimized median cut or standard/websafe, it was default on optimized
medan cut so i left it there..

ARe these options i chose best for pictures? Any tips so i can get
better colours for photos of people? ( not nude pics by the way, just
a pic of a celebrity )