I think for new players, various colors for item/people names can be helpful while they’re learning the system, so they have an idea of what to refer to, espeically for beginner style games.
I like the idea of having NPC text a different color. It’s helpful that in inform the text in  and in “” is in different colors. Also the out of world comments may be nice in a different color. (Such as the score notifications or in-game hints of some kind).
Of course I’m not suggesting it necessary, nor that there should be no way to disable it. Much like lock & key’s use of the dungeon map is helpful, rather than irritating, so to should the option of colored text. Even something as simple as (being worn) or (providing light) in a slightly lighter font can make the transcript easier to browse.
Obviously this can be taken to extremes- a treasure room with all gold text, but photopia showed that this can be helpful to the storytelling experience. Likewise, red WARNINGS might be helpful also. (I’m a big fan of video games that change the HP color when it gets low).
I’ve also seen some games that make a small audible blip when the score increases, or when you’re damaged (like in Beyond Zork), and I find this to be helpful also, though not necessary.
In-game minimaps, exit listers, inventory displaying in alternate windows- of course none of them are NECESSARY, nor are convienance commands like GO TO [any visited room] or the OPEN BOX (first unlocking the box with the golden key) option. I guess it’s a question of what would be appropriate and inappropriate uses of the colors.
I guess the IF community may be divided when it comes to pictures, alternate windows, even the way parsers handle commands, so there is no RIGHT answer. I’ve seen games where this works well, especially for a beginning programmer/player who may not know what items can be interacted with. (Experts may cheat and use the “take all” command to see what’s available to mess with).
Oh well, silly rant of mine. I guess I would chime in and say that some use of color is distracting and supurfluous, while others can enhance the experience.