You can use a larger lingerie bag if you have one (that’s my fave since you can see through the bag) or a regular pillow case tied at the top (harder to keep checking on that though, wet knots are hard to undo). The purpose of the bag is just to keep the lint from getting all over the washer basket and into the washer’s pump. I never have much lint from Noro, but since it’s my own washer I play it safe and bag it. If you decide to go without anything, I would use jeans rather than towels for the agitation factor, since even old towels can lint. Remember you will be digging it out to check on it frequently so keep that in mind when you choose your water temp - the agitation is more important than the temp, although I wouldn’t use cold water.
As for settings, I never had a washer that went by colors, but I would suppose the Whites setting gives more agitation, since you usually want to be more gentle on colors.