I did several thumbnails before getting to this general image. It still ended up tweaked a bit before the finished version but it also had the added benefit of being color studies. I did some studying on lighting based on this video: Here. I highly recommend it. The video was a great bit for studying.
Next is the watercolor. I didn't scan it in at the underpainting stage but this is what it looked like when the watercolor was finished.
I really enjoy this process but the initial scanning of an image is always a bit rough on it. It requires lots of tweaking of curves and levels to try to get it to look right and even when you do it's often still less than you'd want. Finally using multiply layers in photoshop I pump up the shadows and colors until they more closely match the color comp. I then use screen and lighten layers to get the appropriate lighting effects.
So there you go and there you have it. If you want to see someone who's REALLY good at this technique you can find him Here. That's a link to an illustrator named Justin Gerard. I learned the technique by stalking his blog pretty hard and he's MUCH better at using this method, among others, than I am. You should go take a look.