There are two main categories of pixel art in games.
In one category it’s about retro authenticity and these games are defined by the fact that their final buffer is the same low resolution as their art. They also often feature limited palettes, especially ones that were actually used on retro consoles.
There’s also a second category of pixel art, where the style is more modern. The art is still low res, but the final screen buffer is high res. This is where you’re more likely to see stuff like smooth rotating sprites and lighting effects.
You may have a preference for one style or the other, but neither style is bad or “wrong”. Most people who use the modern style are doing it on purpose. There are fantastic looking games in both categories.
Having pixel art and then each “pixel” being 4 or 16 pixels, obvious when scaled or rotated, I think is bad artistic form regardless of whether it’s a vintage styled or modern styled game. It breaks the flow and suspension of disbelief that comes with pixel art. The brain can’t interpolate anymore. Besides, it’s not hard to render to a buffer and scale it up nearest-neighbor, and it always looks better IMO
When I picture good uses of pixel art in modern (not retro-aesthetic) games, I picture it not as a pixel “camera” — a low-res CCD capturing a grid of samples of an originally-high-fidelity world; but rather as the world itself being made up of a bunch of vector squares — like the 2D equivalent of a Minecraft voxel world. The camera is a regular high-resolution camera, looking at a weird blocky world.
In such a world, rotating a pixel sprite by 45 degrees should just look like there being multiple invisible “grids” to the world, each rendered at infinite resolution and downsampled to your display, where the sprite isn’t rotating per se, but rather the pixel grid “layer” the sprite is on (i.e. the hi-res texture the sprite layer is being rendered onto for compositing) is itself rotating.
Of course, if you’re going to use things like rotation/scaling, sub-pixel particle effects, 3D, etc. then you then either have to embrace it in your game setting’s art design everywhere so particular uses of it don’t stick out; or you have to acknowledge that any uses of it are basically “non-Euclidean geometry” from the viewpoint of in-setting observers, and thus slide your game’s mood toward something approaching either science-fantasy (e.g. Fez) or horror (has anyone done a Flatland Cthulhu game yet?)
Also note that “multiple distinct pixel grids” isn’t even unprecedented in retro games, either; there were plenty of consoles where you got one resolution for your tile map and a different (usually higher) resolution for your sprites; where sprites could sit on top of tiles in non-aligned positions. A few consoles and arcade cabinets even combined pixels with vectors!
"Modern style" pixel art doesn't always mean higher resolution. You could use low resolutions but high bitdepth or lighting or transforms or shaders or ...
(Although I would consider a low-res limited-palette game which uses transparency, lighting, rotation, scaling and other transforms as retro since that was already possible decades ago.)
I (and many others) think mismatched pixel sizes look bad, but that there's nothing inherently wrong with those other things.
Can you recommend any games in the first category?
I surveyed the indie-game landscape a couple of years back, specifically looking for games in your first category, but struggled to find any recent examples. 2D transforms, alpha-blending and lighting effects seem to be the standard now.
There are a bunch of retro inspired games (ex Shovel Knight) that do the retro inspired thing. More interesting is a game like Celeste, where it has a 3D level select but during the actual gameplay, the characters move in integers and the screen buffer is still fixed at a low resolution.
Shovel Knight actually has a high-resolution render buffer and "subpixel" movement, but nobody seems to notice because the rules are mostly held in-place.
In one category it’s about retro authenticity and these games are defined by the fact that their final buffer is the same low resolution as their art. They also often feature limited palettes, especially ones that were actually used on retro consoles.
There’s also a second category of pixel art, where the style is more modern. The art is still low res, but the final screen buffer is high res. This is where you’re more likely to see stuff like smooth rotating sprites and lighting effects.
You may have a preference for one style or the other, but neither style is bad or “wrong”. Most people who use the modern style are doing it on purpose. There are fantastic looking games in both categories.