Hey Folders! is a handy utility from the maker of Mail.Appetizer that extends the Finder's colored label feature to labeled folders themselves. As you can see, the entire folder icon takes on the color of the label, though files (fortunately) do not receive the colored overlay treatment (I wager that would result in some really funky looking icons). Hey Folders! requires a small amount of manual work to get it to start with each login, however, as you simply need to add it to your startup items if you want it to augment your finder 24/7 (it's a background process known as a daemon; it won't appear in the dock or menubar - only in a process list like Activity Monitor). Full instructions are listed at the Hey Folders! site. Note: at the moment, Hey Folders! is PPC only, but the developer told me a Universal Binary version is 'coming soon.'
Hey Folders! is offered as freeware from Bronson Beta.