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It doesn't matter if it's greyscale or not in my experience with my Touch.
I've been testing and as long as it's a PNG it doesn't matter.
If any dimension <800x600 you get some of the text displayed behind it.
If any dimension >800x600 it crops the image.
If it's colour it's still displayed happily (obviously in greyscale).
This is ofc using the simple screensaver hack.
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