The default "faked" hi-color on mode 13h has no trouble, it's only when you run the demo with a -24 parameter for TrueColor that you get the error message.
It can't find a VESA mode that is 320x200 with 24-bit color. The TrueColor VESA modes in DOSBox report 32 bits per pixel through INT 10h/4F01h, and the demo wants 24 bits per pixel. Perhaps the devs can explain what's going on with 24 vs. 32 bits, because the RBIL says that standard VESA modes are at most "16M" colors which implies 24 bits, and mode 10Fh seems like it should be a fit for what the demo wants. Loading SDD/UNIVBE doesn't help, still says 32 bits. If you try to cheat and make mode 10Fh report 24 bits per color then the display is messed up.
The part of the demo with the wobbly "Kolor" text is somewhat glitched. Tried loadfix, increased memsize, and machine=vgaonly, but the glitches still appear. Not sure what could cause it... maybe segment limits?