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The jam is loosely based around the GameBoy limitations, it wasn't designed for people to strictly follow all the limitations of the GB nor the GBC.

The way the jam is currently set up allows for a lot of creativity and freedom, but still helps everyone produce a game with a GB style.

I think these restrictions are perfect. Not too restrictive but not too loose either. The idea that you can choose any 4 colors and not being constrained to the ones that the gameboy could render, is a very interesting idea in my opinion. If everyone was forced to use the same old GB colors, I'm sure the results would be more dull etc.

I agree.

I have seen people do some pretty cool stuff people have done with the four color restraint.