That's what I initially thought too, Dale. However, to me it seems like the PNG compression is so well thought out that it doesn't make much difference, and that the size reduction increases pretty smoothly with decreased colour space. OK, the number fifty was chosen mostly for comic relief, but using 48-64 shades seems adequate. You are of course quite correct that 16 shades will suffice on all present e-ink displays, but I've ended up using a bit more to be sure that the images look good on LCD's as well.
A word of warning: It is possible to tell PNG to use a specific bit depth (1,2,4,8,16), and save quite a few bytes. A lower bit depth can lead to trouble on certain devices – I believe this was discussed in a thread some time back, but I can't find it now.
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