Because Director does not do significant dithering of direct-colour graphics, 8-bit indexed images tend to render better on monitors with a higher bit-depth than 16- or 24-bit images do on an 8-bit device, so 8-bit graphics will usually produce the best display on the widest range of monitors. (Of course by the same argument, 1-bit images look better on a colour monitor than colour images look on a 1-bit monitor, but these days you can usually rely on 8-bit colour as the norm.)
8-bit images are also (obviously) smaller than higher-depth equivalents, reducing memory requirements and shortening load times. (24-bit images saved with JPEG compression are an exception here, but because of the added overhead of decompressing, load times are still greater; JPEG also requires that QuickTime be present and is only available for externally-linked picts).
There is one big problem with 1-bit graphics, and that is that previous (4.03 and earlier) versions of Director will hang your system if you try to use linked 1 bit castmembers. Fully-imported 1 bit castmembers contained in the cast (not linked) work just fine, and the update to Director 4.0.4 fixes this bug.
When you've selected all the casts you want, choose "Transform Bitmap..." from the Cast Menu. The ensuing dialog box will allow you to alter the bit depth and palette of the entire selected set in one go.
Note: it doesn't matter if some non-bitmap castmembers are part of the selection. Text, sound, digital video or other non-bitmap castmembers will simply be excluded from the transformation.
[Thanks to Rich Martin (rmartin@tiac.net) for pointing this out.]
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