Unless you wanted to go with a Warcrafty low res hand painted style, then the steps you've outlined there would be the way that most studios would make an asset like that.
If you bake 16 bit and then go to 8 bit in PS it should fix that banding. You will get better dithering between values which will get rid of that stepping.
Cool! Looks a lot better :) I'd advice you to look into how to properly work with skin weights aswell, proper topology is just the first step to good skinning.
Decided to move forward with a character I started in the Sketch Thread. This is a pretty big step for me, but I'm having fun with it. C&C always welcome and appreciated. CONCEPTS
Thank you dirigible, I have been fixing and adding some geometry, also combined the body UV with the accessories UV, next step would hopefully be mudbox.
The object must exist in unreal. As you can see in the video, the step one is getting the object's data in unreal. So I can handle that data later in 3ds.
I would suggest taking a step back, finding some tutorials on the basics of normal mapping, and trying with a more simple object so you can get the hang of it.
Is your heightmap 16bits ? The stepping you see here is called banding, and because of the lack of bit depth in the heightmap, the normal generation end-up like this (aka broken).