I have not tried yet... but I *think* if you go into your google calendar online and change the color through that it will update on the phone. I have not tried that yet, but the custom colors I use on google show up on my phone
This have been driving me crazy too!
I have six google calendars and three different calendars are showing up coded as RED on the phone- not very helpful.
Had the same problem. Found a review on here comparing WebOS to Android and they mentioned the same bug. They stated that if you picked a color from one of the bottom three row from the web interface for google calendar it would work.