Use of the trace tool in illustrator CS2?

I just downloaded the tryout version from the Adobe website to see if it was worth spending $500 on and found the trace tool remarkable accurate.

I was wondering if anyone had pointers on doing photos or colored work, so far I can only make black and white bitmaps with PS, is there a trick since it has to be bitmap? i’m sure i was able to make a color bitmap when i used the create vector from bitmap in flash a while ago but i cant for the life of me remember how.