Well, I guess that my understanding of some basic concepts here is lacking...
When I have my images in Paint Shop Pro or Photoshop or whatever, my colors are specified as RGB values where R, G and B can each have a value of 0-255. Ok, this is all obvious. That of course is 8 bits per color channel, yielding 24-bit color. Ok, now stop saying "duh, what a moron!" and let me continue...
If I use 16-bit color as you say, does this mean that, assuming 565 format where red gets 5 bits, green 7 abd blue 5, that my red channel cannot have a value greater than 31. green no greater than 63 and blue no greater than 31? This is the part I obviously don't get because if that was the case, nothing would work right!
The ironic thing is that all my images are paletized to 256 colors, but the colors themselves are still specified as 24-bit colors I think.
So obviously my brain ain't working quite right here...
...and so I said to Mr. Gates: "$640 billion should be enough for anyone!"