I like the idea of colored names as well. There is a huge argument against it, and currently UT2k4 does not support it. Someone could easily make a mod for it.
My argument for the colored names is that it simply adds a better way to recognize people of the same clan, etc. It's also easier to spot yourself on the scoreboard. You could take time to actually read, but who wants to do that? Some people may abuse this, i.e. making extremely bright names or rainbow sh*t, but I don't care since by that coloring you can tell what kind of person they are.