You are correct, 800x600x16-bit color did not work for me either on my 190cs. The 512kb video memory of the 190cs isn't enough to drive the display (My 5300c happened to have 1mb of video memory, so it could drive the 800x600 display at Thousands of colors). All I got was a 1-bit gray pattern and regret. The option is present though in the monitors control panel. I think the computer tries to switch to 640x400 resolution to create the display, but doesn't know what to do with the extra pixels.
My 190cs does have the external display card, I am not sure if that has an effect on the internal display. I would have to check the tech note block diagram. I think the 68k PowerBooks and early PPC PowerBooks had separate video ram for the internal and external displays.
Sorry for the confusion!