Problem

Raster images still appear in color in preview/plot after selecting the "Plot raster references in grayscale" option from the Iplot dialog box under "Options>Raster". 

Solution

The following line in IPLOT.CFG in C:\Program Files\Common Files\InterPlot\IPLOT\config needed to have a # sign in front of it. This will comment out the command such that it is not executed. When the line is active and the value set to 0, the raster image will preview/plot in color. 0 is color. 1 is grayscale. This line is commented out by default:
# IPLOT_RASTER_GRAYSCALE = 0