setting bits per pixel to 16 yields in strange effects

When I used the NVIDIA X Server settings program to set the color depth to 16bpp and having restarted X, some applications
missbehaved. The Terminal program was not even displayed at all. The editor geany had blue instead of yellow fonts.

ProblemType: Bug
DistroRelease: Ubuntu 12.04
Package: nvidia-current 295.40-0ubuntu1.1
ProcVersionSignature: Ubuntu 3.2.0-30.47-generic 3.2.27
Uname: Linux 3.2.0-30-generic x86_64
NonfreeKernelModules: nvidia
.proc.driver.nvidia.gpus.0: Error: [Errno 21] Is a directory: '/proc/driver/nvidia/gpus/0'
.proc.driver.nvidia.registry: Binary: ""
.proc.driver.nvidia.version:
 NVRM version: NVIDIA UNIX x86_64 Kernel Module 295.49 Mon Apr 30 23:46:33 PDT 2012
 GCC version: gcc version 4.6.3 (Ubuntu/Linaro 4.6.3-1ubuntu5)
.tmp.unity.support.test.0:

ApportVersion: 2.0.1-0ubuntu12
Architecture: amd64
CompizPlugins: [core,composite,opengl,decor,grid,imgpng,mousepoll,gnomecompat,unitymtgrabhandles,move,compiztoolbox,regex,place,resize,vpswitch,wall,snap,session,animation,workarounds,fade,scale,expo,ezoom,unityshell]
CompositorRunning: compiz
Date: Thu Aug 23 20:16:25 2012
DistUpgraded: Fresh install
DistroCodename: precise
DistroVariant: ubuntu
EcryptfsInUse: Yes
GraphicsCard:
 NVIDIA Corporation GF119 [Quadro NVS 4200M] [10de:1056] (rev a1) (prog-if 00 [VGA controller])
   Subsystem: Dell Device [1028:0494]
InstallationMedia: Ubuntu 12.04 LTS "Precise Pangolin" - Release amd64 (20120425)
JockeyStatus:
 xorg:nvidia_current - NVIDIA accelerated graphics driver (Proprietary, Disabled, Not in use)
 xorg:nvidia_current_updates - NVIDIA accelerated graphics driver (post-release updates) (Proprietary, Enabled, In use)
MachineType: Dell Inc. Latitude E6520
ProcKernelCmdLine: BOOT_IMAGE=/boot/vmlinuz-3.2.0-30-generic root=UUID=24e4a8c8-4206-4be0-9271-4bdaa026ae48 ro quiet splash vt.handoff=7
SourcePackage: nvidia-graphics-drivers
UpgradeStatus: No upgrade log present (probably fresh install)
dmi.bios.date: 07/11/2011
dmi.bios.vendor: Dell Inc.
dmi.bios.version: A06
dmi.board.name: 0J4TFW
dmi.board.vendor: Dell Inc.
dmi.board.version: A01
dmi.chassis.type: 9
dmi.chassis.vendor: Dell Inc.
dmi.modalias: dmi:bvnDellInc.:bvrA06:bd07/11/2011:svnDellInc.:pnLatitudeE6520:pvr01:rvnDellInc.:rn0J4TFW:rvrA01:cvnDellInc.:ct9:cvr:
dmi.product.name: Latitude E6520
dmi.product.version: 01
dmi.sys.vendor: Dell Inc.
version.compiz: compiz 1:0.9.7.8-0ubuntu1.4
version.ia32-libs: ia32-libs N/A
version.libdrm2: libdrm2 2.4.32-1ubuntu1
version.libgl1-mesa-dri: libgl1-mesa-dri 8.0.3+8.0.2-0ubuntu3.2
version.libgl1-mesa-dri-experimental: libgl1-mesa-dri-experimental N/A
version.libgl1-mesa-glx: libgl1-mesa-glx 8.0.3+8.0.2-0ubuntu3.2
version.nvidia-graphics-drivers: nvidia-graphics-drivers N/A
version.xserver-xorg-core: xserver-xorg-core 2:1.11.4-0ubuntu10.7
version.xserver-xorg-input-evdev: xserver-xorg-input-evdev 1:2.7.0-0ubuntu1.2
version.xserver-xorg-video-ati: xserver-xorg-video-ati 1:6.14.99~git20111219.aacbd629-0ubuntu2
version.xserver-xorg-video-intel: xserver-xorg-video-intel 2:2.17.0-1ubuntu4.1
version.xserver-xorg-video-nouveau: xserver-xorg-video-nouveau 1:0.0.16+git20111201+b5534a1-1build2