I challenge each of those assumptions. Let's just call this what it is: a marketing gimmick to dupe the fans into thinking they are part of the game. We're not. We're consumers. Making loud noise at the game can have an impact at times, but wearing clothes does not. However, since the Athletic department can only survive on donations -- which is a crazy business model when you think about it -- they need the customers to feel like they are part of the team.
I think the color thing looks okay on television, but its gotten a little played out since so many schools have done it. I just roll my eyes when I see it these days. If a school goes crazy and tries stripes or checkerboards then that's interesting, but only for a few seconds. I watch the television coverage for the games and not for the fan atmosphere.
I don't think the color thing improves atmosphere, except for those of you who keep saying we need to "pull the same direction" (which is only true if everyone is pulling the RIGHT direction). Obviously it improves the atmosphere for you. For me it cheapens the atmosphere. It also makes it harder for me to spot my friends I'm trying to meet up with.
A recruiting tool? I would really like to see any factual information supporting that. I cannot imagine any athlete being swayed to attend a school because the fans all wore the same color during a game while he was there. I guess its possible that some students might be drawn to a University where everyone wears the same color to a football game. I obviously would not have been. When I was in school, hardly anyone even wore the school colors to games. I'm glad that more people wear MSU gear to the stadium now, but I don't see how that is improved by having everyone wear the same color.
I just don't think its a big deal. I don't think it effects the University's image in the least. OTOH, if fan attendance is poor, the color deal only highlights the empty seats. Once a year, yeah its fun, just go along with it. More than that is just silly, and if it becomes an issue then I will just spend my entertainment dollars elsewhere.