For the first issue, you can change the screen palette using F4. Keep in mind, this only works for cosmetic purposes in ZQuest to make setting it up easier. You need to set your dmap to that same palette.
(Take this next bit with a grain of salt, my knowledge may be somewhat outdated)
For file format, GIF, PNG, or BMP are the best. Technically you can import from NES and SNES roms as well, though that depends on how the graphics are compressed in the ROM. There are no maximum dimensions that I'm aware of. You will have to do some degree of manual recoloring if you import images that don't already use the same palette as you're using. That's just the nature of the beast. There is a Recolor function in the tile grabber to make it easier, but it's not perfect.