The strangest decision regarding Mode 2 is keeping the BRIGHT and FLASH attributes. Without those, the Ink and Paper colours could each be any of the sixteen colours. As it is, the select colours have to both be in the range 0-7 or 8-15, not one in each range.
Incidentally, has anyone thought about clever use of Mode 2 and attributes to create a game that runs at a super low resolution, like 64 x 96 (using 4x2 pixel blocks)? It could run at a high frame rate... it might be an interesting experiment