Make sure the TIF image has no transparency. Add your Pantone (PMS) color to the Swatches panel. Select image with the Direct Selection tool (or in IDCS5 or 5.5 choose the Content Grabber donut) and click the Pantone swatch.
Use a great grayscale image to begin with.
Why does it look bad? If you followed the instructions, you should have the exact same grayscale image you started with, except instead of grays and blacks it shows your selected color.
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