I want to make a cake with a design transfer using the wax paper and icing. The only problem is I've never done it before! Do I have to use butter cream icing or can I use any icing? If I have to use butter cream icing, how do I get different colors...do I need to use food coloring? Any tips would be appreciated

Hi - I think buttercream would give the best look. Fondant can be tricky. You would need to use piping gel for the image transfer and following directions at:
http://www.wilton.com/decorating/patterns/transferring-patterns.cfm

I like to use chocolate wafers and pipe them as you would icing. It dries quicker and it's easier to move around. I find that frozen BC transfers stick all too often to the wax paper and break easily.