you're right, smaller sizes are tricky with this approach. For 32x32 the "Clean Up" part would be more like "Repaint", and of course you will lose some detail. Furthermore, you probably would need to use another approach for the border (no solid black, but just darkened edges).
When I try to do 16x16 icons I usually create them from scratch. Nevertheless, SuperSnark is probably the better contact for real pixel art Have a look at this thread.