I am late to the party, the question was already answered but since the documentation is a bit unclear I elaborated a bit more on my blog, especially because the Palette Offset works differently on 8bpp Sprites.
Color 0 is again transparent, so binary value of %0000 0000 will simply show the color of the layer below (if there is one)
Colors 1-15 will be affected by Palette Offset in Map data in the same way as in above example for 4bpp mode which makes sense because they only use 4 lower bits anyway and are simply complemented by top 4 bits from the offset. If Offset is 0 then Palette is unchanged.
Colors 16-255 are not affected by the Palette Offset and are taken directly from the palette. Note that this is different from the behavior for the 8bpp sprites.