Could be you need a more recent ilbm data type, or perhaps the graphics libs just don't support it. Iv'e tried in vain over the years (...decades!) to get ham back drops.
I can get HAM icons. But Those are what I don't want. I figured if I could get HAM backdrops, but all gadgets/icons ran in the palette entries, there would be little fringing.
Performance wise, you'd need various patches to run at a decent rate on an 030 and above, by shunting things into fast ram etc. Perfectly doable, my workbench runs very well in 128 colours, I only reduced it to 64 to save on chip ram.