Finally used a technique that made things easier. Using a layer mask to trim the cutout. Made things easier also any mistakes can be undone using white brush. Should have done this in the beginning.
For every area to be colored I made a new layer, for example "boy coat", I either painted by hand or used a selection and filled. Used dark rich versions of colors, then reduced opacity to adjust.
Here is an example of the coloring done before reducing opacity. (p.s. I changed some of these colors later) This can be tricky as you must remember to turn off any adjustment layers and slide the color back to 100% every time you wish to change your color patch. Use Alt-Click when in brush mode to quickly duplicate an existing color (assuming it is at 100%).
Next I flattened the picture, and made some final tweaks, including blurring some edges and tweaking some shadows. I learned the hard way, that you don't want to blur any edges until you flatten a picture.