I have no idea what you did o_o... I tried everything I could think of (ex. deleting the color animations etc.) but I just couldn't fix it, so I finally took your level and exported the animations, collision data, textures, and stage position model, and it worked fine... So no idea what the problem was, but here is the version I did:
http://www.mediafire.com/?j2jznivnngt
All I know is that the palette seemed to be corrupted, because brawl just uses the next palette or texture if one of them is corrupt. Your background was using the palette of the HUD.