DC does color format conversion when the image is loaded, but only if the color depth of the image does not match your current screen settings. When the conversion is performed, native Windows functions are used to do it. It is usually a fairly decent result.
I have encountered some unusual BMP file formats that don't load like they should. Try loading and saving your file using the Windows Paint program. It might reset the BMP headers to standard values if they are not already. Also, make sure the DPI is set to 72.
Perhaps saving the file in a different format will help, especially if the BMP format truly is somehow different than what DC expects.
Probably none of the above will help, but maybe.
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CocoaSpud
Dungeon Craft Development Team
http://uaf.sourceforge.net