Sorry, I had misread your code. Running your code in the debugger shows that the Color variable contains the correct color even though the canvas is being drawn in solid red both times, so I suspect this might be a bug in Graphics.Pixel.
FWIW, this works as a workaround (and is significantly faster):
Dim C1 As Color = RGB(255, 0, 0, 255)
Dim p As New Picture(g.Width, g.Height) ' for Windows, make sure App.UseGDIPlus is set to True
For counter As Integer = 0 to me.Width
For i1 As Integer = 0 to me.Height
p.RGBSurface.Pixel(counter, i1) = C1
Next
Next
g.DrawPicture(p, 0, 0)