Here's my two cents on the matter.
The main problem, even with Vanilla SRB2, is that the game employs multiple spriting styles. Some are hand-drawn (and thus are asymmetrical and have graphical artefacts) while some are drawn pixel-by-pixel (so they're a lot cleaner). Some are anti-aliased, some aren't. Some have cartoony outlines, some don't, and some are 3D-ish. That's why it's hard to make custom sprites that fit SRB2's style. There IS no SRB2 style, so what exactly IS "SRB2 sprite logic" when it's not something clearly defined?
And that's why it is especially noticeable when you're putting existing characters inside of a kart. Some look better than others when you do it. Sonic and Tails don't really match the existing kart sprite, but other characters look great. It's also why Rosy.kart looked kind of odd.
There's no simple solution to it really, because if you make a kart to cater to Sonic and Tails, then the much-cleaner custom characters will look strange in it, and vice-versa. I liked where the other new kart was going, with the slightly redesigned sprites on Sonic (What ever happened to that anyway?)
Honestly, I really like the new kart, but you're all right, the smooth shading and edges clash with Knuckles' more jagged look. It might look better with a different character behind the wheel though. I think maybe make the shading a little harder and more anime-like.
But to be honest, I'm not really a fan of the pipe-frame. Even though I grew up with it in Super/64/GBA, I much prefer the standard kart in Mario Kart DS/7.
