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.

yes 8 colour limit is not a bug, those 8 colours use zero energy as the display driver doesn't have to refresh those pixels. Using any other colours would use 1000x more energy, that's why there isn't an option to tweak it beyond those 8 that display hardware's low energy mode supports.

If you disable low energy mode, your battery life is significantly decreased.