Painted is always good. I even like my sprites this way.

I know that Safir can produce this stuff as can Jetryl.
The damage can displayed with a simple layer .
The problems are that you still can't animate them and they are still time consuming to produce and need a higher skillset than small sprites.
I say go first with the map sprites and if you got a critical mass of the painted units switch to it.
Even if you won't succed to get enough of them they are still good enough for small portraits, for the screen and decoration, for flavor texts, ingame descriptions and god knows what else.
This would have the advantage that you could release often while getting more attention. It might not look as professional as you hope too but still you have a higher chance to succeed and still the option to switch back.
2)
3D needs also a lot of work I don't know how much haven't done anything yet.
But I know a semi professional mod for Dawn of war.
Some really good modelers over their but they needed already 2 years for say 10 buildings and 12 Units and animations and they are not finished even yet.
example
If you are not an one man army you can stale the release of the demo for 5 further years.
3)
Good Code is more adaptable than art still good code is also an art so peace
