It absolutely does. No more colour issues, no notable slowdown yet. I need to try some heavily scripted quests, and enable some cheats, to see if anything bad happens.
My guess, is that the hardware bitmap as 8--bit simply isn't possible with modern GPUs. The colour table was probably being corrupted, by allegro, trying to write an 8-bit depth plane bitmap in ahrdware, versus a native bitmap in hardware, and a converted memory blit.
We need to try this on Linux and MaxOSX builds--and aye, I will get 'round to those. I need to pick up one or two Apple laptops, and then see what issues we have. Unless @Saffith wants to share his VM image, so that I can run everything from one system. I'll buy some tools to ensure that we pack our files in a 'legal' way for 10.12, too.