So, an example of one way of doing this that I was thinking about:
*texturing stuff*
Without texture atlasing that is going to be a nightmare for both runtime and storage. And even with texture atlasing, ever new color still makes a new instance of a material so with enough different colors the game is going to drop significantly in performance due to tons of draw calls. Not only, like you said there needs to be an additional texture per unique texture atlas to address the color masking if you are using non-repeated texturing. I'm no graphics expert, but I definitely think there is a better way of doing it and I'm going to take out some time to write out what I would do with forge if I were trying to create it myself.
Imagine this for Forge objects:
With this you could add subtle coloring to objects and not only bright contrasting colors which some people on here seems to think.
There is a reason this isn't in user editors... for every color there needs to be a new material made, which is a new draw call at least. Sure the texture is the same, but the way graphics works is based on materials, with textures being a part of materials.
So basically it can work with players or anything in which you have a relatively small number of objects for. There is a reason that Halo has pre-selected colors and not a color selector like that... it ensures that there is a maximum number of materials used for coloring.
When you are dealing with forge you have hundreds of objects being shown at one time, which could amount to hundreds of materials... say goodbye to that framerate. So what you are suggesting may be feasible, but there would have to be a LOT of workarounds to get such a system to work which may result in limiting other things in forge.
I'm going to take some time to write up how I think forge should change for future Halos.
EDIT:
Easier solution is make Forge PC and you export the file to the 360 to run it. All the shadow baking and lighting can be done on the PC.
The amount of issues tied to this is absurd... lol. Security being a main one. And I can almost guarantee that Microsoft is going to have a HUGE say in how this works and if it works at all.