Full-color 3D printers have been around for the last 10 years or so, starting with the Z-corp (now 3DS) machines. Now 3DS has come out with a similar machine that prints in plastic, while MCOR has developed one that uses regular typing paper as a feedstock and also prints in color. While STL files don't convey any color information, PLY files can, as well as OBJ and several others. There are plenty of software programs that let you make models and apply color to them: Cubify Sculpt is an inexpensive one. I don't know of any free ones, but I'm sure they exist.

Andrew Werby
www.computersculpture.com