It does have more than 16 colours, it's one of the tricks of the VIC chip, like the ones with sprites (putting them in the borders, showing more on the screen than the hardware allows ...).
Binary Zone offers a lot of demo collections at http://www.binaryzone.org/update0.php
, had a few of them in the early '90s, maybe still have, the collections generally have at least two or three jaw-droppers.
Pong on an oscilloscope:
and the analog circuit (well, it does have a couple of flip-flops but no microprocessor) for it is described here http://www.electronixandmore.com/project/scopepong/
All of the vector games are really just 'scope games with computer control, at least two or three of the good Star Wars games (one was great), the original Asteroids, and Spacewar at the start as good examples.