And to this day, 24 years later, adding custom colours is bugged. It does not "add" colours, it overwrites the first colour in the list.
EDIT: to clarify, the above is only true if you exit the dialog and then return to it. It has no concept of previously defined custom colors, it just overwrites whatever you had before, instead of appending to the list.
All that having been said, yes, it does appear to be better and more functional than the new proposal.
It's not bugged. It's just non-obvious. Select the empty custom colour first, then select from the colour box the colour you want to add, then select 'add to custom colours'.
Simple really. /s
What the "add" button does, then:
1. overwrite colors step by step in the list (with no undo),
2. in order from top to bottom and then left to right,
3. starting at the most recently clicked custom color,
4. or at the first color in the list if no custom color has been clicked since opening the dialog
Easy! :)
[Edit: and as this dialog is present in Windows 3.0 it almost certainly isn't implemented by same code as Color Dialog from Common Dialog library, because Common Dialogs were introduced in Windows 3.1]
[Edit2: when I think about it probably the only common dialog that actually changed since W3.1 is Print Dialog. Other changes to the library were implemented as adding new dialog types. Notably the ComCtl/COM based W95 file/folder dialogs, which actually aren’t API compatible with previous versions, because they deal in shell objects (ie. ItemIDLists) and not in filenames. (This is also probably the reason why various parts of Windows Setup use really weird looking directory selection dialog)]
I don't mind people trying to re-invent the wheel, but I'm getting tired of having to use a dozen different interfaces for the same task.