Uhm, what are you talking about? The OpenBOR graphics engine makes a complete joke out of the Neo-Geo. You are mistaking individual sprites for on screen colors. OpenBOR supports a 32 bit screen, meaning it can display 16+ million colors at once. That's more than twice what our human eyes are capable of discerning, never mind blowing away the Neo-Geo's paltry 4096.
Now for sprites, there is no such thing as a sprite that uses more than 256 colors, because there is no such thing as a > 256 color table, and no such thing as a sprite engine that does not use color tables. There are some engines that can use RGB images for backgrounds and such, but not full sprite sets.
Now, if you know anything about sprites, you know that 256 colors is hardly a limitation. The mighty Neo-Geo never exceeded 16 colors per sprite, and even modern HD games rarely get past 30 or so. Even then they are typically drawing from a predefined static palette. OpenBOR has no such limitation. You get 256 colors of your choice per model. As in Shiva's body can have 256 colors, each of his fire effects can have 256 more and so it goes for every model in the game. You get another 256 for the background (which can always be augmented with panel models, each one adding yet another 256). Oh and BTW, every remap for every model is also 256 colors. Black Shiva, Red Shiva, Blue Shiva, Green Shiva? They aren't sharing a color table. Each remap is its own set of 256 colors.
That's all before you throw in binding, blending, tinting, alpha masking and so on - all of which are supported. You're going to run out of lifetime before you even approach the upper limits of available color.
What I was telling you above is that limiting yourself to 16 colors out of some old school principal is fine, it's just that the images and the engine don't care and will still be using 256 colors for each, filling in the ones you don't make use of with default values (what those defaults are depend on your imaging software).
DC