I'm completely floored by how helpful all your feedback has been. It's already helping me to get through some mental stumbling blocks.
Muffysb--Linda Blair backward head! that's hilarious. XD And when you put it like that, I can see much more clearly how the original curvature is/was being interpreted.
Mikdog--Yeah, I agree that the new neck has less appeal. The shoulders and neck were originally curved because I wanted a "bubbly" look, a little like Astroboy. But it's hard to ignore the fact that almost everyone who has ever seen it (friends and family included) thinks it looks odd and distracting. I think I'll be able to work out a compromise, though.
christopherjd--Thanks for your feedback! I think that digital flatness is a style preference (or abhorrence. hehe) I actually embrace the look of flat fills. And that's a major part of the style for this project. But I do hope that I can get the animation not to look flat. I think there's a certain mystique in the way a very simplified 2D toon can reveal its three dimensionality through motion.
It's funny. I was just talking to my brother about this. He was commenting that I was going to have a really hard time when I animate the shadows of the scenery and props falling on the characters. I was completely caught off guard by that because I never intended to use shadows, unless a scene had important lighting. For me, shadows would detract from the style. But it's actually really helpful to know that flatness does not have universal appeal.
I agree with your point that even if an art/animation style is not to one's taste, the story can sometimes draw them in anyway. So I may have to work that angle with people who are not so keen on the style.

I have definitely noticed that the story is the main thing that viewers care about. I once made a really
really crummy animation in Mario Paint and somehow brought myself to show it to about 30 people who weren't too fond of me.

But it was a pretty funny story and almost at once, it put them at ease and everyone was laughing uncontrollably. Something about it just engaged them. Now I spend weeks on 2 seconds worth of animation and it doesn't have anywhere near the appeal of that crappy video. Hmm... I'd better stop thinking about this before I make myself sad!
Slowtiger--Thanks for your comments! You are absolutely right. I am concerned about how expressive the characters can be in their current design, especially because they lack eyebrows. Here are some rough animation tests where I try to convey their emotions and personalities:
http://vimeo.com/10382253
Any design/animation suggestions to bring out more expressiveness?
[edit] to get a better idea of whether that emotional display conveys the emotions, I should probably mention that he's first annoyed, but then thinks of a plan. The rest of the shots focus more on conveying personality than on facial expression specifically.