In WAP 1.x, there is not much you can do with colors even though your phone has color display. Naturally you can use color images (GIF and animated GIF) and see links in blue but thats basicly all. With WAP 2.0 (including XHTML Mobile Profile and WAP CSS) the possibilities to use colors are much richer. You can define different colors for texts, links, borders etc., use background colors and of course color images. One good document to see is "Browsing on mobile device" available at Forum Nokia web site, http://www.forum.nokia.com/main/1,35452,1_1_15,00.html#xhtml . Also WAP Forums WAP Cascading Style Sheet specification is worth to read (www.wapforum.com).
In your reply you are writing that in WAP 1.X it is possible to display GIFs and animated GIFs. However, when I embedd gif pictures in my XML code and connect to my site with my phone, I receive the alternative text insted of the picture (BTW, on the 7210 Emulator the pics are displayed with colors).
The code I'm using is
<!DOCTYPE wml PUBLIC "-//WAPFORUM//DTD WML 1.3//EN" "http://www.wapforum.org/DTD/wml13.dtd">