The colors per sprite are used to define the total number of colors you can have in a single palette. Even though each palette can contain 16 colors, you’ll only have access to the total colors per sprite you set in the Sprite Chip.
For example, here we have changed the CPS to 3. Reloading the color tool changes all of the palettes to have 3 colors.
This means that you will only have 24 total colors across 8 palettes. One thing to note about palette size is when saving the colors.png, each palette’s colors will be saved in sets of 16. Any palette colors outside of the CPS value will be filled in by the mask color.
You’ll want to use the PaletteOffset() API to help you calculate the correct color offset, especially when working with palettes smaller than 16 to start at the right color ID.