Thanks so much, we were very happy with our submission this year! I thought I had played a lot of games this year but somehow I missed all of them which shared the idea of scaling images, I'll check yours out shortly!
For scoring, we made an "official" 16x16 version of each artwork, trying to be as accurate as possible to the source while using as simple a color palette as we could (this took a while, especially finding art and images that could be scaled down well).
Stars are earned by on a composite score comprised of 3 tests:
1. Exact pixel to pixel matching. (If you have the correct colored pixel in the right place)
2. Amount of pixels of each color in the entire image compared to the target image. (# of red pixels in your image compared to # of red pixels in the target for example)
3. Basically the same as number 2, but we do it over 4x4 pixel chunks. (Each chunk is pass/fail, you either have most of the needed colors for the region or you don't)
These three scores are combined and averaged, then scaled to be from 1-5 stars. And we graded on a curve so 5 stars was possible without exactly recreating the official image.
So for full marks you need the right color balance for the whole image, have those colors in generally the right areas of the canvas, and then the exact pixel-to-pixel matching test scores how well you did at making the right shapes in the right areas. Its not a perfect system, but it seems to work well enough!