This solution worked for me but be warned it involves fiddling with the registry.
http://www.neowin.net/forum/topic/927140-win7-fixing-old-256-color-games-with-distorted-palettes/ The following is 3rdDin8's method which I used:
1. Run your game at least once and exit out of it.
2. Go to your registry and navigate to "HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\DirectDraw\MostRecentApplication" (if you're using 64 bit, go to "HKEY_LOCAL_MACHINE\SOFTWARE\Wow6432Node\Microsoft\DirectDraw\MostRecentApplication")
3. Take a note of the name, game.exe, and the ID, which looks similar to this: 0x02e41c67
4. Remove the '0x' part of the ID and separate the values into pairs, like this: 02 e4 1c 67
5. Take the pairs and reverse their order, like this: 67 1c e4 02
6. Open notepad and add this:
---------
32 bit only
Windows Registry Editor Version 5.00
[HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\DirectDraw\Compatibility\<NameOfGame>]
"Flags"=hex:00,08,00,00
"ID"=hex:00,00,00,00
"Name"="game.exe"
---------
or
---------
64 bit only
Windows Registry Editor Version 5.00
[HKEY_LOCAL_MACHINE\SOFTWARE\Wow6432Node\Microsoft\DirectDraw\Compatibility\<NameOfGame>]
"Flags"=hex:00,08,00,00
"ID"=hex:00,00,00,00
"Name"="game.exe"
----------
*Note: Change <NameOfGame> to whatever you want, leave 'Flags' alone, enter your own ID keeping commas intact, and change 'game.exe' to whatever it is.
7. Save it as 'fix.reg' and run it to import it to the registry.
Here's my example from 'The Hell' mod for Diablo:
----------
Windows Registry Editor Version 5.00
[HKEY_LOCAL_MACHINE\SOFTWARE\Wow6432Node\Microsoft\DirectDraw\Compatibility\The Hell]
"Flags"=hex:00,08,00,00
"ID"=hex:8b,c1,c3,34
"Name"="TH.exe"
----------
If you're scared you'll screw up using the registry or just want something quicker you can try this:
1. Open the "Worms 2" folder
2. Open Notepad
3. Paste the following into the Notepad window:
taskkill /F /IM Explorer.exe
frontend.exe
Start explorer.exe
4. Save as "worms2 fix (or anything really).bat" into the Worms 2 folder.
5. Run it. (If you have a shortcut to Worms 2 on your desktop or in your start menu you can link it to the .bat file by right-clicking the shortcut, choosing properties, and in the "shortcut" tab changing the Target to "C:\GOG Games\Worms 2\(filename).bat" GOGWORMS2)
Keep in mind this kills explorer for as long as you're playing so the taskbar won't be visible.