Remember when I was whining about how shrinking the portraits made the people look bad in Machine City? Go here, look halfway down the page when they start talking about faces.
The core difference, far as I can see, is that the linework and shading are two different faces. When you squint, or are far away, the linework fades and you're left with the shading. From close up, the linework dominates.
Since I have little shading on my portraits, that would probably explain why they look crappy when scaled down.