I'm fine with the current policy of keeping the child posts if they're reasonable quality, which your image almost qualifies for at least. Just deleting them might not be the best way to go about with this problem, and can be a bit unfair when the mistake is on the artist, who then suddenly changes it so quickly.
For this I would recommend a policy that if the art is obviously artifacted upon immediate notice, a flagging is fine, but if the original artist posted it with that quality, then an allowance could be made in some situations. For your image I would say it's not unreasonable to appeal it on those grounds should it get deleted.