The Blog Island displays information quite a bit differently than our other Islands do.
Here's an analogy: The blog island is like having an old-school radio on your desk. You "tune in" to the station you want to listen to, and the radio "broadcasts" that station. You can change the station being broadcast by turning the dial. You change the blog category being displayed by changing it with the action gear.
In order to ensure that the island stays on theme with whatever blog is being "broadcast," the background color or image are actually set from the BLOG, not by the island, as all our other islands are. This article details how to do that.
Start by heading to Module Tools -> Management Blogs -> Manage Blogs
From there, find the Blog you wish to colorize or add an image to, and choose the Edit Icon.
Scroll down a bit on the next screen. Pick a color or an image, and save!