I installed Ubuntu Natty on my Virtualbox (Ubuntu guest on Ubuntu host) and the first problem that greeted me when I boot up is the 16-bit display error message:
The virtual machine window is optimized to work in 32 bit color mode but the virtual display is currently set to 16 bit.
Please open the display properties dialog of the guest OS and select a 32 bit color mode, if it is available, for best possible performance of the virtual video subsystem.
Note. Some operating systems, like OS/2, may actually work in 32 bit mode but report it as 24 bit (16 million colors). You may try to select a different color mode to see if this message disappears or you can simply disable the message now if you are sure the required color mode (32 bit) is not available in the guest OS.
It stated that your system is optimized to work in 32-bit, but the color quality is set to 16-bit. First of all, there is no “display properties” in Ubuntu that allows you to change from 16-bit to 32-bit. Secondly, when you open the monitor option, you can only select 800×600 (or lower) screen resolution.
Here’s what I did to solve the problem.
1. Install Guest Addition. Do not restart after the installation has finished.
2. Open a terminal (in your Ubuntu guest) and type
gksu gedit /etc/X11/xorg.conf
Paste the following to the file.
Identifier "Default Screen"
Device "VirtualBox graphics card"
Monitor "Generic Monitor"
Modes "1280x800" "1024x768" "800x600" "640x480"
Save and close the file.
3. Restart the VM.
It should work now.
Note: This was tested on a Ubuntu Natty 32-bit guest.