I think there could be a quick & simple solution to the "cuteness" issue: just add grit (but not in an exaggerated manner).
Make armor and clothes less shiny, add rust, dust and (blood?) stains on it.
Add scars, dirt and occasional acne to their skin.
That should be enough to appease both camps, as it will look pretty but gritty and believable, considering goblins' lifestyle.
