Yeah your right, I didn't really explain myself fully, some images can look good, but the flexibility of colours was regarding only really having I think 8 different colours to choose from, that's pretty nerfed. I had some cool Anonymous images and a Tux Inter image for a while, they looked great for that half second before low power mode, and acceptable on low power but on intermittent transitions on some images the colours would go all over the place, to the point that I had to unlock then relock my phone so that it looked tolerable, hopeless really. Maybe that bugs fixed these days as that was PR1.0 days I think, I doubt it though.
Correct me if I'm wrong, but I believe the 8 colour limit isn't so much a bug as an unfortunate trade off.