I ran into the same situation a few weeks back
The issue was with the image I was uploading and not Jive. I was uploading a PNG file that was our logo (aka "flag"). After playing with the image I figured out that the logo had a background (was not transparent) and that is why the custom color was not showing up. So I jumped in photoshop and removed the background in the image. I then uploaded the transparent image and set my custom color and IT WORKED! Below are the two examples of the image (the first has a background and the second has no background):
Hopefully this helps!
I am also having this problem. Someone uploaded a photo which we don't want to use, and now I'm trying to go back to a solid color and am unable to. It keeps reverting back to the image, just as you said.
Thanks for confirming the issue, so I know it isn't some personal configuration problem. You can revert to a solid color if you 1) make a jpeg of the color and replace the custom image, or 2) select on of the preset colors.