Chris, others (incl. myself) have encountered similar display glitches after running certain games. One workaround I found (albeit not exactly the same problem) has saved me a lot of grief. I now use a utility that saves my desktop settings/layout. If anything disrupts the display, all I have to do is hit Restore Desktop. It's the utility I use, but others are listed here.
Your 4-bit/16-bit problem is beyond my ken, but Googling points to variety of possible incompatibilities - e.g., an outdated video driver, DirectX problems and a conflict with NetMeeting. So, I guess the questions you have to answer before consulting a tech support forum such as CNET include:
Have you run DirectX Diagnostic?
Have you checked with your vid card (or PC) manufacturer for an updated driver?
Is NetMeeting running in the background?
Have you downloaded a utility like Belarc Advisor that provides a handy, complete list of your System Specs?
As a last resort to avoid future hassles, have you considered installing one of the virtual sandboxes? (Returnil was just offered by GAOTD, and another well-known virtual is Sandboxie. Best to read up on the pros and cons before installing virtualization software. Each has many proponents and detractors.)

i downloaded egyptoid 2. when i go to play it the screen goes black and nothing happens. i can only press the escape key or the windows button to get out. when i do the screens color quality goes from 16 bit to 4 bit and the screen looks all stuffed up. when i go to change it back only 4 bit is available to choose from. the only way to set it back is to restart the computer. it only happens with this game and i really want it. so can somebody please help me. i have xp home sp2 if that helps.