Well, you don't have to use B/W images, but LS doesn't print in color. The "color" is provided by the labeling surface only. Only recently colored discs, other than the well known golden, have been introduced (you'll find a review about them here on CDFreaks).

If Nero shows no errors (you do get the Lightscribe icon in Nero, right?), then there may be a problem with your drive. You can try updating to the latest LS System Software from lightscribe.com (if you don't already have).