The color you are using is probably one that requires higher graphics. That said, the game gives more details to things that you are closer to, explaining why it is more blue the closer you are. I'm going to go out on a limb and suggest that the main problem is that its just a color that the game won't render correctly. Whenever I do my skins, I always have to go back and redo them a couple of times, because the game doesn't see the colors the same way graphics programs can. There is probably a more limited range of colors that the game can produce compared to your graphics program, which would cause that to happen.
Also, moving to ZT2 Editing, so hang on!