Gambit, this is within my plans for the DM1 conversion and exactly what I would want to do! I clearly want to use the DM2 engine to globally upgrade the DM1 experience, graphics and sounds included. I already started to put more colors to some of the original creatures, but that requires some time to get the whole thing done - if you are for making some of them, I will gladly work with you.
About the format, don't bother using a 256 colors palette, just work on 24b RGB: we'll use an images convertor to reduce to 256 colors. I have one such thing to make DM2 graphics.dat which uses the DM2 palette.
CSBwin can handle just the 16-color-palettes.
You forgot CSBWin3D
A more difficult project would be to bring more animation to the original creatures. For example DM2 supports animation sequences which consist generally of 3 to 6 images. But that will require even more time and design of new images, quite a lot of work!
Just having more colorful versions of the creatures will be great!