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We use color mostly for communications channels and when you concentrate on a conversation you ignore the colors of the ones that don't apply. We also use it for a standard of informational items where color indicates the same priority of need to know over and over like "He just hurt you bad".
Rainbow just doesn't appeal to me or to most of the people I've respected the opinions of. I've found sparing use of color in text descriptions becomes somthing unusual and predictably "special" to the players when used so rare. Player access to using color has proven to scare people away IMHO and they can't use it.
My two cents.
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