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That was it.  It was importing a new background so I had the main and then background 1.  I created a 256 color background and used the 8bit version and it didn't freak out with pixels.  Thanks for the help.  I'll keep working through the tutorial and now see if I can figure out when I would import a new background instead of using the main for a room.  Maybe scripting?

The background is 16 bit.  I notice that the char doesn't flash and I can walk him around the walkable areas but that the background flashes?  I've tried using another background which is supposed to be 256 colors but I'm not sure if I'm doing this right.

I'm going through the tutorial and I'm using one of the backgrounds download from the downloads page.  When I run the game to test it, the background shows up mostly black with a pixeled outline of the background and it continuously flashes like a strobe light.  Am I missing something in the tutorial or are others having issues with this?