I think they are ugle only if they are in the wrong setting... In the middle of a field persay, ugly, in a cave with stalagmites and stalactites, not too shabby. Even though they arent perfect, they are better than placing 5 or so more sprites(the ones you say dont fit in
).
ADDITION:
I thought the sprites that 'look horrid on that tileset' might look better with an under-water approach. So I slapped on some other effects in a more traditional area(regular isometric). Here's What I got:
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Better... 8.5/10