As a pixel artist by trade, does that mean that I have to draw with that resolution in mind. Coz I tried it recently, and the drawings are too big that it doesnt look anything like a 16bit era game.
I'm not a pixel artist myself and I though pixel art meant something dealing with far smaller resolution and palette than what you are doing with that image?
Getting the most out of very limited pixels is what pixel art is about, isn't it? On a SNES game a tree could be around 30x30 pixels and getting the same look with sprites as huge as what you have there (like 300x300 pixels?) is near impossible as far as I understand.
So maybe you should also rethink the style a bit as you're coming from considerably lower resolutions to 480x800. Seems like you're viewing the objects pretty close which also increases the sprite sizes.
1) Depends on the kind of game you're making. Android devices have many resolutions and many aspect ratios and there's a certain design decisions you need to take with your game. The topic is discussed frequently around here and you can search for older threads about the options.
2) You mean vector graphics? See the above but note that how to deal with varying aspect ratio / resolution and choosing between pixel and vector graphics are 2 different problems and solutions that you can mix and match.