I went home last night and searched for the mame.ini file, and it wasn't there. I figured mame.ini is for actual mame, while mame32 must save those settings elsewhere.
At any rate, I figured that the ddraw setting you mentioned above must be DirectDraw, so I went into the "Properties" menu on mame32 and started playing with the direct draw checkboxes (they have a bunch of different options). I forget off the top of my head what I finally checked and unchecked, but it's now running great (just had to play with those settings).
Strange that it was goofing with the colors of the games, don't understand what I did, just know that it's now working fine. I was originally going to put UltraStyle on that machine (even downloaded it and tried configuring it, but it kept giving me errors). I like mame32, and it has always just worked in the past so I wasn't sure what it could've been.
Thanks for your help, without your post above, I would never have thought to mess with the DirectDraw settings etc...