This subject has popped up once and a while on the newsgroups etc. Its an interesting thought, but the problem is that both hardware and software would need to be first reverse-engineered, then re-engineered to accomidate the colour.
There is most likely some provisions in the NewtonOS for colour, but nothing that can be easily enabled... but it is also possible that there was the framework for a colour LCD and that you could pop one in
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