I had the problem described and seemingly resolved here in that when trying to play Doom on Windows 7 via Steam the colours were all bright pinks, blues, greens – all forms of strange colours.

The fix in the post above nearly worked but I had to modify the “machine” entry slightly, as follows –

Go Here.
C:\Program Files (x86)\Steam\SteamApps\common\Ultimate Doom\base

Open this file in notpad.
ultimatem.conf

Change these lines to read.

fulldouble=false
fullresolution=desktop
output=openglnb
machine=Svga
aspect=true

and that sorted it! 🙂