My mistake. It does not expand it, it just displays it.
What I meant: the preview just displays what is in the framebuffer.
If you load a limited frame into it where 0x10 is supposed to be black it will display it as dark grey. The preview simply ignores any color range setting.
In the projects "Pixel format" setting dropdown box there should be actually:
8 bit (Full)
8 bit (Limited)