I realize there's a certain aesthetic you're going for here, and what I'm about to propose is a prime example of a slippery slope, but if you're willing to go juuuuust a little further from 1-bit graphics to 2-bit graphics, you might actually get legible photographs.
Here's a website that I love that has a similar aesthetic; every image here has at most six colors (although each image has its own color palette): https://solar.lowtechmagazine.com/
Decker's UI is primarily black-and-white, but it actually uses a customizable 16-color palette. On the community forum[0] there's some discussion about dithering and importing colored photos. Users have taken advantage of color to make some really gorgeous projects[1].
I realize there's a certain aesthetic you're going for here, and what I'm about to propose is a prime example of a slippery slope, but if you're willing to go juuuuust a little further from 1-bit graphics to 2-bit graphics, you might actually get legible photographs.
Here's a website that I love that has a similar aesthetic; every image here has at most six colors (although each image has its own color palette): https://solar.lowtechmagazine.com/