Yeah, I have to give kudos to SNKP for not letting certain-kind-of-people create naked characters. (It's pretty damn retarded and sad, in my opinion)
I guess having an opponent in a "raving" color scheme can be very distracting, but I'm sure if we ask, SNKP could give us the option to let us see our opponents in their original color scheme when they pick a "Color Edit" costume, while the opponent, on their end, can still see theirs.