First: this isn't a UI modification. It's a feature of the EQ2 game engine as it is out of the box. (Also SWG, I might add.)
Second: exploit? I would love to hear how this one could possibly be construed as an exploit. It doesn't require any intentional circumvention of any safeguard within EQ2. It doesn't provide the user any advantage, unfair or otherwise, and to be quite frank, it doesn't harm anyone.
I understand that color can be annoying to some, especially if you rely on channel color-coding to sort out what you need to read and what you can ignore in circumstances such as combat. But to even suggest that this could possibly be an epxploit is laughable, let alone to strongly imply that that is what you believe.
My advice to you: if you group with someone using an overabundace of color, ask them not to while grouped with you. If they refuse to respect your wishes, find another group—they probably wouldn't be too kindly disposed to your other preferences either. But to imply that someone using color is in some way breaking the ToS/EULA is tantamount to calling someone who cusses an exploiter—you may not like it or agree with it, but it's well within the rights provided them by SOE within their (SOE's) virtual world to do so.
(And if whoever is using color isn't grouped with you, ignore them and move on.)
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