Marzipan can definitely be colored. I do it all the time. It can do anything fondant can do, but it tastes better.
Marzipan is a thick barrier for a fruit cake, sealing in the moisture. I think cakes are again covered in fondant because the marzipan itself is kind of yellowish and most people want a white wedding cake. Plus, marzipan has a lot of oil from the almonds and royal icing decorations wouldn't hold up very long.
I have several books where it shows cakes with just a covering of marzipan. There's one in Martha Stewart Weddings and it's actually very pretty. I think it's the cherry almond cake.