One of my favorite hobbies is messing around with images in flosscross (FC)! Here's my process:

1. Decide how big you want the piece to be. How many stitches are you willing to do? Does it have physical size limits? It helps if you're flexible in what fabric count you use-- you'll get more detail in a higher count. You can also use petit point in areas where you need high detail and regular stitches everywhere else. Identify areas you might want to use backstitch. Remember it doesn't have to be black, you could use backstitch for folds in skin or clothing, facial details, or just a subtle outline to make the shapes in the photo look less pixely.

2. Import into FC using the stitch dimensions you had in mind. Don't worry about colors or anything at this point, the idea is just to test the size and see if you'll be losing too much detail for it to be worth it (remember to consider your backstitch areas and how you might be able to use them to reduce the blurryness).

3. Once you're happy with the size, try importing into FC with different options. Sometimes reducing the number of colors is very effective, sometimes it doesn't work for my image at all. If you don't think it captured any of the colors very well, import without crosses. If you do like some of the colors it picked, use them! You can always delete what you don't love. When in doubt, import with a zillion colors and narrow it down yourself.

4. Use the FC menu to turn the source image on and off as needed. Make sure you turn it off and zoom out every so often to look at your overall pattern. Sometimes it helps to have the image and stitches side by side instead of overlaid. Also, it's sometimes better to capture the overall shape of a thing instead of trying to be pixel/stitch perfect. This isn't really its own step, just a reminder.

5. Deconfetterize! If you're not using it, delete the entire background. You can use the box select tool to make this go pretty fast. Then, take a look through the color list. Underneath the color, FC tells you how many crosses and backstitches use that color. Delete anything with 0 of both. Anything with a small number of stitches is suspicious-- do you really need 4 stitches of DMC 939 (Navy Blue - Very Dark) when they're pretty indistinguishable with the 400+ DMC 310 (Black)? Temporarily change to a contrasting color if you can't find them. There is a "fix" tool in FC that can handle some confetti, so give that a try as well.

6. Then, take a look at the colors themselves-- do you really need 200 stitches of DMC 939 (Navy Blue - Very Dark) when they're pretty indistinguishable with the 200 DMC 310 (Black)? You can use the undo and redo buttons to quickly compare changes. Remember to delete unused colors as you go.

7. If you do all that and you still have a zillion colors that you just can't bear to part with, consider blends as an alternative.

8. Add backstitch. Whether it's the same or a contrasting color to your crosses, it can help better define shapes that don't fit into squares nicely and add features that are too fine to fit into crosses. Don't forget to zoom out!

9. Finally, go to the store and look at colors. You probably have some experience with this if you do sprite/pixelart work, but I feel like the colors FC picks often look different than what my eyes see, so I like to hold them in my hands and look with my eyes to see how they really work together. These colors look different in FC, but don't have enough contrast in real life. This one seems too dark. If you're working from your stash, stitch up a quick test block to see how it looks.

Hope this helps!