The characters are totaly different though. True, if was creating a character called "Micky a mouse", that looked identical, there would be some issue.

This is (apprently) from some advert in america. Now whilst my sheep, and the sheep owned by Aardman all look similar, there is no real connection outside of the fact they are lambs.

A better view of what shaun in wallace and gromit looks like
My character looks nothing liek this. IT doesn't have the same skin color, doesn't have the same fur color. It doesn't have the same ears, eyes mouth. Myn has hand like hoofs, and it stands on two feet. Oh, it doesn't have a tail either.
Saying they look indentical, or anywhere close, is a gross exageration.
Granted I cant use the name "shaun the sheep" in my game. But it does not mean I can't use a sheep character.
I think to solve the problem I will have to subtly change the name. The name "shawn" will do. The only reason i am staying even close to the name is i have a story to stick too form the previous game. I can't just suddenly change my characters name to "bob ferkin".
Oh, and one final note. Should I worry about farmers trying to sue me?
They might own some sheep that look vaugly like my character.....