Simplifying the shading even more is not an option. The outlines would have to compensate for the lack of shading. This is done very nicely in the screenshot you've posted, but those are hand-drawn characters. No outline renderer I've tested was good enough to give similar results, especially when the models have to be animated. You just don't have enough control over the lines, so you can only get a few basic outlines, otherwise lines tend to appear and disappear in places where you don't want them, making animations look unnatural.
So the characters are rendered with a simple shader, having two shades of each color, which is also very common in comics and cartoons.
EDIT: However I can play around with the light setup, shadow size and contrast to give the character a more flat look. I'll see if this leads to any improvements.
So the characters are rendered with a simple shader, having two shades of each color, which is also very common in comics and cartoons.
EDIT: However I can play around with the light setup, shadow size and contrast to give the character a more flat look. I'll see if this leads to any improvements.