Wildforyarn - I found the directions in the winter issue of creative knitting magazine. It is really simple! You use vinegar along with the koolaid and cooking it in the microwave sets the color so it won't wash out!
The yarn is the natural fingering weight from knitpicks.
fancypolar - I got some of the soft colors just by experimenting with mixing flavors....no exact recipe, just a drop or two of this, a dab of that and a splash of another....