Do a search, and you'll see lots of issues with Encore Bluray slideshows. I do not know what the formula may be for success. I do not use them.
Yes, a plain slideshow has one mts per slide. A slideshow with transition but no zoom/pan has one per slide and one per transition. A slideshow with transition and zoom/pan has one per slide with the full duration per mts.
A variety of quality issues have been reported, but I don't recall the color flashes issue. I get what looks very similar to me.
I recommend doing the slideshow in Premiere, and just having no control for the user. One person reported making a chapter point for each slide, and that allowed some advance.
You can get a clean slide using no transitions and no pan/zoom; H264 for project settings (used for slideshows) is the recommendation when Mpeg results in poor slideshow quality.
