Indeed, manual interpolation (traditional frame by frame animation) can be such a pain. Every tecnique has it's pros and cons, and thus, limits. Cutout animations requires a bit of planning before, so that all character parts fits well together during the moviment.
If you are doing this kind of stuff, rotating limbs and such, i really recomend you to use some software that automatizes it for you. I've created a post a long time before about free tools, there are two apps for animation that could help you in there, besides blender - they are Cool Motion, and Tisfat. Check the post out at:http://www.scirra.com/forum/free-tools-and-resources-for-game-development_topic42219.html
If you are interested in learning what i've done in Blender, you could read this tutorial:Part 1Part 2
Good luck with your work :)