These are largely obsolete by now, but I'm keeping them here as they may still prove useful in some way:
Excerpt from LEGO Island source leak showing how animation data is set up:

LEGO Island's bitmaps are paletted in a specific way. The bitmaps must be 256-colors (or else the game will crash loading them), and the first 10 and last 10 colors of the palette are forced to the same colors, as well as 2 colors in the middle, regardless of what they may be in the original bitmap....