Earlier this year I studied a few of the Amiga portraits and yes, they reduced VGA to fit in 5 bitplanes (32 colors), but they actually don't even use all of the colors. I found them to be around 20-25, keeping _more than a few_ aside for, say, the GUI.

Except in close-up chat mode, from memory all you get is text and a background color for the text, and not much cursor or anything else. So I'm still wondering why they didn't allow themselves a couple more color indices, which can go a long way even without dithering and anti-aliasing (which there isn't too much of in the VGA portraits). Maybe it ended up compressing a bit better.