Squareness doesn't seem to affect it, but the dimensions do. My first 70x70 square bmp didn't work properly; CF "found" 13 colors on my 3-color image, and the resulting CSV was distorted nearly into random noise. Switching to a 128x128 canvas fixed it. It may be safer to stick to powers of two or just go by trial and error until you find a canvas size that works.
If that doesn't work, I'd suggest using "standard" colors like primary colors, secondary colors, shades of gray, or web colors. I don't know if that has any effect and the readme says you can use whatever you want, but you never know.