I don't think using monster colours specifically were the problem. From the looks of it, OP has used subpalette #3 for things in the playfield, which supposedly doesn't look good on the HUD (which is hardcoded to #3 in the vanilla NM engine). So instead of having to edit all the screens that relied on using palette #3, they looked for a simpler way to assign some other palette to be used for the HUD attributes. Unfortunately, the total of 4+4 subalettes are not shared across sprite and background attributes (there are no attribute bits to access the palettes of the other plane), so their initial idea wouldn't work out.
You can still dedicate any and all of the background palettes 0-3 to the HUD though, with a little programming.
Again unfortunately, there's a bug in the scrolling routines that overwrite the attributes of the HUD, so you either need to:
a) dance around the bug by clonestamping the top of every screen with the attribute you want, or
b) find and remove the bug.