Does anyone have any suggestions for making hair on a mans head that looks like peach fuzz. The guy has dark blonde hair that is shaved almost bald (not a crew cut, even shorter).

You could dip a sponge in gold or yellow+brown color diluted with water and blot it onto the head.

I tried something similiar with a toothbrush, but the bristles were not far enough apart. Would you use a kitchen sponge?

Yes, I'd use a regular kitchen sponge, wrung out well. You can always go over it again if it's too sparse at first.