The method I've always touched up my art in Photoshop was to first scan the original pencil drawing, and then redraw the outline in Photoshop tracing the original. Then, I'd use the Paint Bucket to fill in the color (in a layer(s) under the outline layer). But this was done slightly different from my older method.
This was the first time I used Photoshop's Pen tool to make the outline. Before, I used the Line tool to draw it bit by bit. Quite time consuming, and no matter how many times I stopped to draw a new line, the outline always looked a bit rigid (almost like an N64 polygon model!). But for this, I figured now was as good of a time as any to finally mess around with the Pen tool (before now, I never understood how to use it properly). But I figured out how to get the Pen tool to do what I wanted. And the end result was a much smoother outline. Huzzah!
Though, please note that my left thumb is still a bit blocky looking. I worked on the Pen path for that before I fully figured out how to make the Pen path curve the way I want to. And I was too lazy and apathetic to redraw the path for it. Meh.