is it possible to prompt a user to pick a color? I know how to make the prompt but I can't find a easy way to prompt a user to enter the color name e.g. red and it'll be converted to mIRC's color code or prompt the user to pick a color.

There's no easy way to open a selection screen that already shows the various colors. You could create a custom listbox window that has one line in each color and let them double click on one to select it.