I had a Collie which had 1/4 German Shepherd named Mike. He was the greatest dog. I was young when he was a puppy, 2 years old, and I was a bit rough with him and sat on him sometimes, when he grew up he did the same to me and licked my face, I had to go outside with a squirt bottle to keep from getting mauled with love, and maybe a little revenge, I don't know. My grandfather took him to Alaska and lost him : (
Anyway, the tests are valid, and it's not hard to find the difference in breeds, even the family line in a breed is discoverable.
No, they can't tell hair color yet, but they can compare dna from a known dog or any animal and have certain parts of the dna that differ according to those lines.