KEY QUESTION:
1) How should the control scheme for Pico 2 work? How do you want to control the character and what abilities should he have?
*NOTE: There are TONS of abilities for Pico that I haven't mentioned in this post, so don't get crazy if you think your idea is 'stolen'. :)
I think the original mouselook sounds good. As long as you dont make the walking while looking elsewhere look really bad it will turn out well.