Switch into GRAPHICS 9 mode (16 shaded bitmap mode). Use a Display List Interrupt (DLI) to change the colors down the screen. You can arrange it to get a nice grid of 16 hues of 16 shades == 256 colors!
The paletted colors were actually only out of 128 colors. (16 hues of 8 shades)
More useful, though, are some of the software-driven tricks for drawing more colors on the screen. One simple one interlaces between 16-hue and 16-shade pixel modes, combining to give you any of 256 colors (albeit a little washed out), anywhere on the screen. In glorious 80x192 pixel resolution. (Not a typo)
Or cycle between 3 16-shade modes, one Red, one Green, one Blue, and you get 4096 colors, anywhere on the screen. (Or do it at higher horizontal resolution and get 64 colors or 8 colors.) There are GIF and JPEG viewers for Ataris that have been around for _years_ that use these modes.
Even fancier tricks give you 30 shades of grey at 160x192, some obscene number of colors at 160x192, etc.
In fact today (before this post appeared on Slashdot), someone contacted me about the character-set (you know, "font"? :^) ) driven multicolor text mode I came up with a decade ago that let me do cell/tile-based graphics and get 13 colors on the screen. (Simply toggle the font at each Vertical Blank Interrupt -- no need for Display List Interrupt tricks.) I wrote a puzzle game with it.
Anyway, he pointed out that those huge-pixel (80px across) modes can be "applied" to any graphics mode (try GRAPHICS 2:POKE 623,64:?#6;"abcd"), and therefore a similar frame-flickering trick could be made to get lots of large, multi-colored tile graphics on the screen.
Lots of stuff you can get ANTIC and GTIA to do; a few of which are 'artifacts' or 'bugs', but all consistent across the platform. :)
(Heh - I wonder if a single person will care about that braindump I just presented.)