I was just equipping my PC with a generic set of Full Plate. I noticed his avatar looked slightly different then before. So I re-equipped him with the armor and guess what: the colors kept changing !!!

Neeetoooo, never noticed it before ;)

Good job Zuvio yet another entertaining bug BGII gamers have discoverd

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WoW. Thanks.
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plus i noticed last night that shadowkeeper includes armour colour . . .

Shadowkeeper's

Armor, Leather and Metal entries are usually overridden by the armor you wear.

There are a few items, however, that depends on those resources. Notably the ordinary Amnian style horned helmet. Also some quest items that can be wielded/worn (but are not intended to) depends fully in those values too.

I like doing custom values for for female human mages (to change the colour of that stupid brown dress) and the monk (since this one will not be wearing any armor).

Underdark spoilers ahead:
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The most notable effect of your leather/armor/metal values are when you are in drow avatar mode. Here your ordinary clothing colours are set to drab gray, but all your other equipment (weapons/helmets/shields/armor) will have their colours overridden by your leather/metal/armor values.

This means that if you have set your metal colour to green and is wielding the Flail of Ages in drow avatar mode the Flail of Ages will be green.