I've been working on learning how to create painted textures. I was able to create a castle model and hand panted the texture on to it. The castle looks great, but only when it is specifically set to "unlit" meaning it is not affected by the sun in the environment. My problem is, I want the model to have a texture but still be affected by the environment light, but I'm struggling to understand how to go about that.
I use Unity, and in this image I have the same castle with the same texture, but the left one is set to unlit and the right one is set to lit. 
As you can see, the left castle looks great, because its hand painted and unlit, but the right one shows all the hard edges.
I've looked into smooth shading, but the issue I had with that is the castle then looks almost like its made of plastic or a bubble? Maybe I'm not using smooth shading correctly but it didn't produce the results I was expecting.
When I look at a game like Wind Waker (and I now that uses cell shading) you can see in this image that the boat has a texture, but is still affected by light and the boat doesn't look bubbly or have hard faces. 
How can I achieve the look of the unlit castle but with the castle being lit?
Here is an image with the castle smooth shaded on the right. I guess its not necessarily bubbly, but more cloudy. 
