This is a really good activity with lots of potential!
You could possibly use this idea and change it slightly as a "review" game for students. For example, if you were working on "questions
" and you wanted to use the "colour bits of paper" idea, why not write a question word
on each bit of paper and have students formulate questions using the words they pick on either a topic of your choice or theirs??
Just a little something that popped into my head when reading this post.