So any time I go to try out some sprite mods myself, in-game my colors are glitched for the respective new sprites.
As for a general example, let's use a sprite of Sonic from the fan game, Sonic: Time Twisted.
Here the colors are glitched for a reason I don't know.
For reference, the sprite should look like this, and looks exactly the same in the sprite sheet (minus the green back.)
I used the latest version of Paint.net to export as a .bmp with 8-bit indexed colors and no encoding.
Help would be greatly appreciated.
EDIT: Forgot to mention that I am indeed using the latest version of Sonic 3 A.I.R, and am also within the range of the game's palette.