well the bad thing is "Yoda - the fighting frog", but maybe if he wasn't jumping all over the place, Yoda wielding a lightsaber could be watchable ?
like put him on his "floating chair" and then he could do battle Dooku or Sidious ...
I wasn't very fond of the duels, but this could smooth them a little ;-)
As for coloring, don't know if the whole "blue/green/red" or mutlicolored is better, depends an your story and taste ...