Pros and cons?

I noticed some crap discolouration in my attempts to make Minority Report 2xVCD when using YUV that seem to disappear with the use of RGB. It looked like there were only 16 colours being used in some areas of some frames.

Is it normal to loose colour no matter which format? My conversion attempts often look wishy washy without some 'tampering' and even then they still look washed out.