Snowy The Chao, a Sky Blue Mono-Two-Tone Sonic Chao, was flying around the clouds.
Not much of this needs to be capitalised. I'd say only Snowy and the first Chao need capitalisation as they are his name and title. Everything else is description which doesn't need capitalisation.
The sun was going down and the sky and the clouds we're *were getting that nice tint of pink, orange and yellow colours. Snowy flew to the highest cloud he could fine *findand watched as the sun went down. He always went there to keep himself out of trouble and to stay away from the stress the Time Hero business has brought him.
Whilst I like the description so far, I feel a brief description of what a chao is might be in order. Although that isn't really essential as this is a chao site, it's still a good habit to get into. I'd also have liked a brief paragraph explaining in short the adventures of the Time Heroes for people who haven't been involved in those RPs. Again, it's your choice as your target audience is those people.
But he also came to experience the beautiful sundown. The sky was that was full of beautiful tints of hues slowly fade away as it turned into the dark and beautiful Indigo Snowy has come to love.
The word order in this sentence is very sketchy, so much so that I can't actually figure out what you should do to fix it.
"My beautiful Moon, let there be more nights as beautiful as this one, with more of your beautiful night lights" Snowy smiled as the Moon slowly shined all over Moon Shine Village.
No capital letter needed on moon, full stop needed at the end of the dialogue. Also, how can a moon shine slowly? Slowly is the wrong word to try to use there.
He dove down towards the peaceful village where he recently lives and enters his hut. He turns on the light and walks over to his bed and lays down.
You've changed tense here: it should be "where he has recently lived and entered his hut." It should also be turned and walked. Remember that you have been writing this in past tense and should stick to that.
"This feels nice, saved the dragons, hanged out with my friends, no doomsday plots, and no more work!" Snowy thought to himself as he slowly fell asleep. He glanced at his Ice emerald and fell asleep.
No caps needed on ice.
He dreamed about his past adventures. Oh those we're the days, Fighting, racing, saving the world.
Were, not we're. We're is an abbreviation for "we are", were is the past participle for was, just to clarify. Also no need for caps on fight. I also feel this should be the start of a new paragraph.
Snowy felt free. But of course, these days have been horrible. Before saving the dragons, he had to spend his days alone. After all the years saving the world no one gives him any shout outs or any small parties.
Gave, not give. And had, not have before it.
Not even a single ******* triangle fruit cupcake. But he moved here into Moon Shine Village where his number 1 fan, 'Light' a Shiny Yellow H/F/F, lives.
Although I like the personal touch the triangle fruit sentence has, I feel swearing perhaps isn't appropriate for a chao story. Another comma is needed after 'Light'.
Anyways, the next day, Snowy woke up, to hear loud screaming and water splashing everywhere. A dark chao called 'Good Bye' was attacking the Village.
This probably should've began another paragraph. I also feel this is a little too rushed. How does he discover this? No caps needed on village.
Snowy jumped out of bed, grabbing his Ice Emerald and quickly ran outside.
No caps needed on ice emerald.
"So we meet again Snowy!" the dark chao yelled evily. Snowy rolled his eyes and sighed. "Didn't I tell you to stay out of my Village?"
Whilst I like this dialogue, there is a common grammar issue here. Each time a new speaker speaks you should leave a space and start a lone as so:
Snowy jumped out of bed, grabbing his ice emerald and quickly ran outside.
"So we meet again Snowy!" the dark chao yelled evily. Snowy rolled his eyes and sighed.
"Didn't I tell you to stay out of my Village?" Snowy wasn't surprised, the evil chao always did the same thing, he came over and tried to kill him with his water abilities but failed. "Water may win against fire! But you keep forgetting one thing..." Snowy chuckled as his eyes started to glow and he floated above the ground. Notice I also fixed the tensing issues in one of those sentences too, along with a couple of random capitalisation's. Your grammar involving the speaker is good though, I'm inpressed that you have managed to avoid a common pitfall involving capitalisation after a piece of dialogue.
Snowy wasn't surprised, he always does the same thing, he comes over and tries to kill him with his water abilities and fails.
You switched to present tense again: see above for the fix.
"Water may win against Fire! But you keep forgetting one thing..." Snowy chuckled as his eyes started to glow and he floated above the ground. "What?" the dark chao asked again, at the same time the dark chao charged a water beam and was ready to knock out Snowy. "ICE BEATS WATER!" Snowy shouted loudly as he charged an Ice beam at the dark chao.
Same speech thingy as before. Also no caps needed for ice. I'd have liked a bit of a more fleshed out battle too but this is fine.Good Bye didn't have to time to react and was sent flying away again. Snowy sighed and landed back in the ground.
On the ground, not in the ground. In would apply that he sank into it :')
He entered his hut again and puts his Ice Emerald down and sighed. "Again, the villagers are save but they we're in hiding the whole time which means, no celebration in my honour, again. And they won't believe Light who was watching because she's just a kid."
No caps on ice emerald, but you get that now. Safe not save, were not we're. He packed a few things in his backpack and angrily exits his hut.
Exited not exits.
He decided to go visit Speedy and Milo in the cold mountains of 'Snow Bridge'.
I'm not going to change the way I look or the way I feel to conform to anything. I've always been a Freak. So I've been a Freak all my Life and I have to live with that,you know. I'm one of those people.