Unfortunately, you can't get a splash image and custom colours to play nicely together. It's a GRUB problem rather than anything wrong with the script, so you either need to put up with it, or just use one or the other.
As for your kernel names, it should automatically list the actual distrobution, followed by the kernel version, eg:
Ubuntu, kernel 2.6.15-26-386
However, the menu item names are arbitrary. You could call it 'I LOVE LINUX OMG', and as long as you specified the other options, it would work perfectly fine. Currently, the only way to do that kind of thing using this script is to use the 'Direct Edit' option. Scroll down to where you'll find all of the actual menu items. The line which says 'title' is fine to edit to whatever you like. Just don't use any bizarre characters. You must, however, keep the word 'title' .