Who's doing the GUI stuff for the DC version, BTW? Tell 'em I'll buy them a beer if they get it finished up.
I think I remember that fixing the GUI was a matter of simply converting the PNG files to 256 colors, 8bpp or something like that. I have lost my Dreamcast stuff in a hard disk drive crash last year (trying to get it fixed asap but it's rather costly) so I can't really check what I did, but it was something that was easy to fix.
The "real" fix for it would actually be converting it to RGB565 (16bpp - 65536 colors), not 8bpp. That said, he's working on something entirely new, not just fixing the color banding issues with the old one.