Yes you can color it. Pop it into the mircrowave for a couple of seconds to soften it up. Just get want ever color you want and add it into the fondant. knead it like bread until it is all mixed in. I smear shortening all over the surface that I'm going to be working on, to keep it from sticking.
Another way to color that works well is to pinch off a piece of fondant about the size of say a malted milk ball candy, color it a shade darker than you want your finished fondant to be, then knead this ball of colored paste into your white fondant. It seems to mix in more evenly, no streaking or spots of darker color here or there.
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