The color depth of my remote desktop session has become low (256 colors/8 bit). How can I fix this?

This seems to be related to a known problem with Windows Server 2003 Service Pack 2: “The color depth is unexpectedly changed to 8-bit when a high screen-resolution setting is used in a terminal-server session that is connected to a Windows Server 2003-based computer”

Applying the hotfix from fixes the problem.

If applying the hotfix and restarting the server still does not fix the problem, confirm if the following registry key exists on your server:

Registry subkey: HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Control
\Terminal Server
Registry entry: AllowHigherColorDepth
Value: 1

If it does not exist, add it and restart the server.