Perhaps it is somehting else then.
The green channel uses pin 2, which is also used for monochrome video (source).
If the monitor was not correctly recognized by the VGA card through DDC or Monitor ID bits, strange things couldn happen.
Maybe the monitor receives no signal or a grayscale signal over the green channel (pin 2).
This would make sense insofar, that your issue vanishes once an application (Win95) is in control (overwrites VGA BIOS settings).
I know, this pretty far-fetched. It's just an idea, anyway. 😅
Maybe it helps to disable "VGA palette snooping". It also caused funny things in the past.
Like an messed-up colouring of the Win95 boot animation.
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In what to one race is no time at all, another race can rise and fall..." - The Minstrel
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