Tried in Linux under Wine and in Windows 7 VM
According to several documents (e.g., Charles MacDonalds') and accurate emulators (Regen, Fusion, GPGX), there is a bug in the VDP's implementation of shadow/highlight on color 14 on sprites: specifically, color 14 in sprites is never shadowed, regardless of palette line (color 14 is the highlight operator when it comes from palette line 3).
This is currently not implemented in Exodus.
One easy way to test this is in Sonic 2 with the so-called "night mode": level select+debug+hold C when starting a level will enable shadow/highlight. One of Tails' orange will be visibly not shadowed.