After using the Rebuild Icons feature in Tweak UI for Windows XP, the icons may look ugly (such as the 16 color mode). This is a known issue, caused by an incorrect data assigned to Shell Icon BPP registry value. Re-setting it's to 16 resolves the problem. Use the following steps:
You will need to restart Windows for the changes to take effect. If that does not help, or to apply the change instantly, try this:
Right-click Desktop, choose Properties, Appearance Tab.
Click Advanced button, choose Icon from the drop-down list
Set it's size to 31 and press OK, OK
Repeat the steps (1-3) and set the Icon size to 32 (defaults)