1. The most common reason people experience this loss of sharpness is because after they down-rez their image, they then increase the magnification to make the down-rez'ed version of the image about the same size on their screen as the high rez version was before down-rez'ing. Of course, since one has discarded many pixels in the down rez'ing process, it contains less information and looks worse.
Another way to think about this perceived loss of sharpness is the size of each pixel vs the size of the smallest features visible in the image. Suppose you start out with a nice sharp head-and-shoulders portrait in which each tiny hair on the face is around 1 pixel wide. If you down-rez this image by 10x (linear dimensions), each pixel will now be 10 "hair widths" (or, say, 1 zit wide wide, LOL) instead of 1 "hair width" wide, so, of course the down-rez'ed version looks less sharp.
2. The bit depth of an image has nothing to do with the spatial resolution. An "8 bit" image means that the brightness of each of the three color channels (ie, R, G, and B) is represented by an integer that can only run from 1 to 256. Put differently, such an image has only 256 different levels of red, 256 different levels of green, etc. etc.
In contrast, in a "16 bit" image the brightness of each channel is represented by an integer that can run from 1 to about 65,000.
Visually obvious problems can easily arise with 8 bpc images. These problems include banding in slowly and smoothly varying areas such as clear skies, a "crunchy" look or noise when you try to brighten deep shadows in an image, and lack of smoothly varying or even any detail in very bright regions (ie, because, say, the red channel in your flower photo is maxed out at 256 in certain parts of the flower). 16 bpc images were developed to minimize such problems, and works incredibly well.
Bit depth issues pertain to each pixel separately. They have next to nothing to do with spatial resolution, ie, how many pixels wide should the image be to accurately represent the tiny hairs on someone's face.
As a side comment, I use 16 bpc images for probably 95% of my work in Photoshop. About the only time I'll ever go back to 8 bpc images is if I am forced to because I want to use some old plugin, software, or data format that only supports 8bpc images. The prime example of this are JPG files. They are all 8 bpc.
To convert an image between 8 and 16 bpc, just select the bit depth that you want in the "image / mode" pull down menu.
Finally, I should comment that the bit depth of 99.99% of all images are either 8, 16, or 32 bits per channel. However, operating systems also come in "32 bit" and "64 bit" versions. Because the term, "32 bit", occurs in both places, people sometimes confuse the two numbers. In contrast to the bit depth for images, the numbers for OS's tell you about the maximum amount of physical memory in your computer that can be utilized, the size (in bits) of each chunk of data/instruction sent to the CPU, etc.
To distinguish between the two usages, I usually write "bpc" after the number when it pertains to images, and "bit OS" when it pertains to operating systems. So, one can (in theory, at least) have 8, 16, or 32bpc images being processed in either 32 or 64 bit OS's.
HTH,
Tom M