Shoutbox

To my knowledge, this is something that works with custom names only.  So, go to rename a contact, type in the name, highlight that portion with your mouse, and then click CTRL-K (a color window will come up) and choose your color.  You have to have "Display formatting attributes..." checked in the preference settings of contacts.

If you wish to still see the person's MSN name, add (!N) in the custom name field, and that will show it.

Hope that helps.