@BreannaB Personally i think the muted colours work much better. The fact they they are all closer to grey gives the piece some sense of unity. The saturated colours in option 2 are so far away from grey that is no unity at all, each colour has equal importance the main focus, the bear, might as well not even be there. If you wanted to use more saturated colours, id keep them from closely related families. As youve got a lot of green already, choose some lilacs, creams and blues, but stay away from reds. Green and red create a sense of conflict, whereas this should feel peaceful.
Also, the soft edged flower attracts too much attention, as everything else has a hard edge. Looks a bit out of place.
I think the values could be grouped better.
The bear might read better if it had a much lighter coloured group of leaves behind him, hes the same value as the leaves as it is and gets a bit lost. A good rule of thumb is light over dark, and dark over light.
Hope this helps!