I solved it by some great googling and studying-
Here is what menu.lst must look like if you want colored text with your grub splash images-
# Pretty colours
#color white/blue black/red
## Splash image!
So, comment out the "color etc/etc /etc/etc" and then add any html
color below the splashimage entry.
My new Tinycore-1.4.3-USB has utilized this if you use the Grub/EXT2 or 3
It also has extra grub splashimages in the boot/grub/splashimages folder.
Check it out.