I downloaded the image and ran it through Filter Forges Water Color Painting filter by Northern Shadow.
You can use it if you wish.Or use it for reference. 8 bit but i can make it 16 bit if you need.


Original-


If you want to do something like this from scratch i would use the pencil tool and a tablet to do a few layers of the outline (or just sketch it out and scan it first), and then start painting (individual layers) using a brush (not the airbrush) set at about or lower than 60% opacity.
Create a palette of all the colors you need and select from it.

OR

Another cool way to do it is to use the original image set the opacity to 30% or so and paint OVER it in a bunch of new layers.Sort of like tracing with the paint brush tool.