Color Coins is going to overload the block chain and cause major problems with the core bitcoin features.
Interesting question.
If Colored Coins could choke Bitcoin it means the anybody can do such an attack regardless of Colored Coins. I think that's why we have the 540 Satoshi dust limit.
Exactly. If colored coins can hurt bitcoin due to blockchain size issues, then bitcoin would be hurt by an attacker anyways. I hope we
do see an increase in the number of transactions thanks to colored coins. It will motivate discussion about raising the block limit, reducing the orphan cost by implementing block propagation by hash, and floating the miners fee.
Since colored coins uses OP_RETURN to store the metadata, there is also no issue with the UXTO becoming polluted.