N.B.: the following arguments apply to indicating user level on nodes in a thread, which I am rallying against – not to colorising the Other Users nodelet, which is harmless.

we can still click the link and see a persons XP.

Doesn’t matter. You might think it’s illogical because the information is available anyway, and I used to think the same, but that’s programmer-think; experience has shown me that forums suffer when such information is displayed openly and benefit when it’s not. I’ve seen this in several cases where forums switched from one way of working to another (and sometimes back). It is evidently true. Putting the information a click away effectively makes it invisible as far as regular conversation is concerned. Only those who are determined to find out about it will. If it’s openly displayed, however, it will affect all interactions.

why not reduce site load by eleminating that click in some cases?

That’s bogus reasoning. Noone’s going to visit every homenode in every discussion to make sure they know all user levels. Displaying it openly OTOH would require retrieving each user’s level on each and every thread view. So site load is definitely lower when the information is not shown openly.

individuals could decide if they wanted to color different names.

Would you also say individuals should be able to decide whether they want to see node reps prior to voting?

Some things are not a matter of taste or choice.

Makeshifts last the longest.