I havn't got a clue what iconx is, I don't fiddle much with Amiga programs or workbench, I'm a gamer so excuse my lack of knowledge :/
However I did manage to get the game to run just by double clicking 'karate' in the folder then click ok.
The game crashes after a while on freeplay.
Winuae latest stable release, Classic Workbench UAE A4000 Power (JIT 040 FPU 2/32MB)
I also tried it with JIT off too and still crashed.
I also tried the ADF version with A1200 quickstart settings and that also crashed.
Colours seem to be ok for me.