I think it would be better to think in terms of information theory, rather than the hypothetical color of bits. If I have a legally obtained copy of a copyrighted song (that is not permissively licensed), then I am restricted in my right to share copies. Certainly I can create a one-time pad and communicate that to someone, and I can XOR the bits of the song recording with that one-time pad, and the author would argue that I now have colorless bits. But I send it to you along with instructions for how to decrypt it, I'm using a mechanism to communicate a perfect copy. It isn't that the ciphertext is now "colored", it's that the net effect of my mechanism is that I've communicated the original song, with perfect fidelity. That's what matters: the net effect of the system as a whole. I will have created a communication channel (perfectly legal), and used that channel to share a copyrighted work without the creator's permission (not legal, depending on the details).
OK, you are right, he is using "color" in a funny way to reflect the idea that the violation is somehow in those bits. But in my opinion, the violation is in the channel as a whole (the ciphertext, the one-time pad, and the instructions on how to decrypt, shared for the purpose of distributing copies), not because of "colored bits".
Your opinion is an engineer or computer science opinion. I am not criticizing when I say that; I share it with you. But the opinion of most of the rest world is not with us, and this is a good essay explaining that opinion. It is important to understand it if you want to understand the world, make correct predictions about how most people will operate in these matters, or figure out how to best change people's minds. (I can definitely speak from experience that the direct approach is not very effective. Can't tell you what is, unfortunately...)
The moment you xor your one time pad (OTP) with the song to generate a ciphertext C, both OTP and C become, you could say, conditionally-colored.
You're not restricted in redistributing one, so long as you don't redistribute the other. If you redistribute both, even in different channels, logically that's a copyright violation unless you have sufficient controls or restrictions to prevent further redistribution until someone downstream from ending up with both and being able to recombine them.
Realistically, the only reason you'd generate C and distribute both OTP and C is so that someone eventually gets them both and can reconstruct the song. Trying to claim you didn't have that intent wouldn't work in a civil context, and might not even work in a criminal context.
