If you use latest GDAL 2.2.4, you don't even need to add -setci to gdalwarp
The fact that the resulting raster doesn't display well by default with QGIS
2.18 (actually I also find it to be the case with a QGIS 3 dev version) is
just a small glitch of QGIS itself that doesn't recognize by default a file
with a band with a color palette and an alpha band, but the file itself is
just fine. Please file a QGIS ticket for that.
Regarding the palette having 256 entries rather than 2, this is a feature of
the TIFF format itself. When you add the alpha band, we need 8 bit depth, so
the color table has 256 entries. If you didn't need an alpha band, then adding
-co NBITS=1 would have recreated a 1-bit depth file.