When I try to turn on the gag label, I get the message: "oops- there is an error in the color input. please type color in the format <255:0:255> using integers between 0 and 255."

This means that you have entered an incorrect format for the color of the label hovertext.

For the default white text, you don't even need to enter the color numbers. For example, if you wanted "Prohibited from speaking" in default white, just say this:

       "/1g label Prohibited from speaking"

If you wanted to color the text red, you need to know the equivalent numbers in RGB (Red, Green, Blue) format, which in this case is <255:0:0>, being maximum R and 0 G and 0 B. Thus,

       say "/1g label <255:0:0> Prohibited from speaking" to get red:  Prohibited from speaking.
       say "/1g label <0:255:0> Prohibited from speaking" to get green:  Prohibited from speaking.
       say "/1g label <0:0:255> Prohibited from speaking" to get blue:  Prohibited from speaking.
       say "/1g label <128:128:128> Prohibited from speaking" to get 50% gray: Prohibited from speaking.
       etc.

You will need to play around with the numbers to get the color that you want. To get the exact shade, you can just rez a new cube, rightclick and click "Edit", and select the Texture tab, and play around with the color. When you get the color shade you like, take note of the color numbers for Red, Green and Blue. That's the number you want.