Why does this have quality issues?

No, it's not worth trying to edit and resubmit. It's blurred. As @Jill_C says, the black and white editing does not pass. But even if you correct that, the picture would not meet the quality requirements.

If you are new to stock, you should consider these resources: https://helpx.adobe.com/stock/contributor/tutorials.html
Please read the contributor user manual for more information on Adobe stock contributions: https://helpx.adobe.com/stock/contributor/user-guide.html
See here for rejection reasons: https://helpx.adobe.com/stock/contributor/help/reasons-for-content-rejection.html
and especially quality and technical issues: https://helpx.adobe.com/stock/contributor/help/quality-and-technical-issues.html

I would say that there is a distinct quality difference between the character and the background. However, neither are in crystal clear focus and both could be better. Obviously the background is a old black & white photogragh but it is still of poor quality and looks to have been scanned from a magazine or photograph rather than a negative. 

The background image in black and white is quite blurry, and the color image is also not entirely in focus. Did you take that picture or borrow it from elsewhere? The toy nutcracker is probably protected by IP. This type of "selective color", a mixture of b&w and color, is not something that Adobe finds acceptable or saleable.

This Help page has more detail in what type of editing is acceptable:

https://helpx.adobe.com/stock/contributor/help/photography-illustrations.html