Hi monish
You don't explain, if you want o show a RGB image in the VGA....
I tried the same as you, but I began showing a 320x240 8bit grayscale, with my own code in the FPGA. Also, I did a RS232 comunication to pass the data from my PC to the DE2 board, and a simple software in my PC to extract the bmp header from the file to send, and send all usefull bytes of the bmp file to DE2. It's quiet easy. (Avoiding the DE2 control panel use)
Then I did the same, but in 320x240 pixeles in RGB, obviously I use the DE2 on board SRAM to store the image data in both cases, all was succesufully. And all this for like a "learn practique".
To show a 640x480 pixeles in RGB mode on VGA, SRAM is out of space, so I decided to use SDRAM to store the data, I'm trying this now...but I still can't get manage the SDRAM data as fast as I need.
If you want, or ask some about the FPGA code...I can post it (But I'm so begginer like you...so maybe my code is not very "academic")