Tips and insight on making and decorating the "Dress Cake"

My daughter is turning 4 and we are making that ultimate girlie cake, the cake that looks like a big hoop skirt with half a princess doll on the top.

We're making a 4-Layer cake with a dome as the top layer to simulate the skirt and creat the basic structure.

The question I have has to do with the decoration. Basically it comes down to fondant vs. speadable (i.e. buttercream) icing. I figure that the fodant will create a more clothlike effect, but I haven't worked with fondant before. I've heard that it's a pain to work with. We can buy pre-made fondant, but it comes in white, how would we color it?

I guess we'd also like to have some fondant basics if possible.

Thanks