I think it sounds like a lovely idea. But, WE have a very active crochet group. And, even they tend to prefer Pound Of Love kind-of yarn.
I would urge you to call and speak with the Activities Director at the Community you are considering. Ask to make sure that (1) it will go to GOOD use, and (2) that they accept donations and (3) that they will have a place to store it until it is used. If they cant use it, they may be able to refer you to another facility or charity that can.
You MAY even consider asking if you can do the dying as a project WITH the residents.....have a little intergenerational thing goin on! I know our residents LOVE children. And, they will appreciate even MORE a yarn that they helped make. Ya know?
In the past, we had no "policy" regarding in-kind gifts. People would just drop things off (10 bags of yarn/National Geographic Magazines/books, etc) and although they were most certainly well-intended, some things we had no immediate use or no room for. So, we would end up using paid staff time to dispose of it. AND, the person's thoughtful donation didnt get used as they intended. We developed a policy that requires the manager to approve of such donations in person. People really appreciate that we dont want their gift to go to waste.