Windows 7 users often moan about compatibility issues for older games like Diablo 1. These games were working fine on systems like Windows 98 or Windows XP, but unfortunately there are problems on newer systems. The most popular one is displaying wrong colours in Diablo 1 when using Windows 7. The colour problem causes the pixels in the game to display wrongly, making the graphics unreadable sometimes.
The solution below is the official solution for problem with washed out or rainbow colors in the game. If you play Diablo 1 on Win 7 and you have blunt colours or multicoloured pixels, it can be fixed with a registry entry.
Download the file and double click on it and accept the entry. You can now run the game.
Note: The above registry work only with the mod Diablo Awakening, so it will not work with other Diablo versions. Also, this solution does not work for in-game movies. Moreover, minimising the game via alt+tab may cause the colours to go bad again