What about using that technique for creating new aliens? Green sectoids for example 
without problems
right now only problem with this `tech` is that when soldier is killed (dying animation is not modified too) he create item that represent his corpse, and corpse don have that colors.
Too bad that you don't see any hair or skin in a flying suit.
So once you got flying suits, this way to differentiate your crew doesn't work anymore.
maybe add new color for flying suit e.g. pink?

I really see only good use of these colors in classic xcom/alien race tree.
Different skin coloring of humans is silly.
Color coding of alien rank will be kind of a cheat...
Only human color coding of rank could be useful, BUT, these colors will be too far from original (how'd you like green personal armor?), so also will be silly 
how different colors of skin is silly? Xcom hire only white people? :>
whit this we can add:
new kind of aliens, or simply not every alien look that same (they can have blond people too :>)
new ethnic group to soldier and civilian, new hair color etc.
camouflage :> (your soldier are green in forest, black in night, white on arctic)