Using vesamenu this is now much easier ...

For the vesamenu, it is called a background image, rather than splash
image, because the menu appears on top of it.
All you need is a 640x480 image in png or jpg format (the default image
in larch is called bkgd.jpg)!

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But here are the old instructions, just in case ... (the utility programs
are in the 'syslinux' package):

Splash screen for isolinux/syslinux
-----------------------------------

This could be easier ...
Anyway, it needs to be in a particular format. 640 pixels wide and quite
a bit less than 480 pixels high (to leave space for the boot text).
Then it may not use more than 16 colours. You can reduce the colour
depth by setting indexed mode in the GIMP (image - mode). It may be
sensible to use only 14 or 15 colours (to leave something for the
text?) - but I didn't really investigate this further. I reduced
my image to 14 colours.
Then you can export it to a .ppm file, which serves as input to the
perl script ppmtolss16, (which comes from the syslinux tarball -
its inverse is lss16toppm, which is also in there):

./ppmtolss16 < splash.ppm > splash.lss

To test this, convert it back and take a look at the result:

./lss16toppm < splash.lss > test.ppm

Just replace the existing splash.lss file (in cd-root/isolinux) with your
version.