Some hint if you are experiencing color problems (not my work):
for others having the color issue on windows 7, It is not drivers nor compatibilty problems, try this only:
#1 on Diablo exe file right click and go to compatibilty, and choose to run in windows xp sp2 than check these (I used the "Autorun" icon with the diablo image on it since I could not find an .exe and it worked the same)
-Disable visual themes
-Disable Desktop composition
-Disable Display scaling on high dpi Settings
and last run as admin click apply and ok
now the inportant part
before lauching the game, right click on the desktop and click resolution "change" "Dont change anthing (minimize it only) and than change background to solid "color black" only
Should work fine now.
If this wont help, I recommend a VirtualMachine with WinXP or Win98. Have fun.