Here's a Xanadu II shot in full color, then 16 colors and then below the background in 16 colors and finally the background with 75% reduced colors (
less of a reduction than BS received at 16 colors).
Since the full screen pic with sprites is 'only' 82 colors, it's fair to compare a 16 color version, sprites and all, to the Beyond Shadowgate 16 color background pics. The spriteless Xanadu II background is only 44 colors
before getting reduced, which means a 16 color version is proportionate to the 32 color BS shots.
Full color 16 color full image
16 color background Background reduced by 75%
When you tell photoshop to dither a picture, you're giving it creative license to go in and add original artwork. Here's what that DKC screen
really looks like when dropped to 16 colors-
This should drive home the point best. Below on the left is a 79 color screen shot from Magical Chase exactly as Magic Engine spits it out. On the right is the same shot in 159 colors. I added real actual PC Engine palette colors to create the pic with twice the number of visible colors. What's the difference? Although it could be argued that some of the additions I made enhance the picture, most of it is just noise.