If your monitor supports the 800x600 resolution, the 1 MB of VRAM can display 16-bit ("thousands of colors" in the Mac world) color.
I had a G3-L2 upgrade card in mine for a bit, which did make an appreciable difference in just about every aspect of system use. They were costly at the time...
A Performa 6400 was my main computer for years before I bought a G3 tower. The reason Apple doesn't support anything above OS 8.1 on this machine is because they dropped support for the horrid software-based GeoPort modem in OS 8.5. I was fortunate enough to get a real internal modem in mine...