A recent thread over at the CIC Forums discussed the different colors of Confederation ships. Rather than undergoing a mass-repainting between Wing Commander 2 and 3, the prevailing theory suggests that the individual colors are representative of specific fleets or particular roles. Deathsnake took the concept one step further and mocked up some brilliant examples of how familiar ships might appear under different circumstances. They look pretty sharp!
It's a case of different units and ships with different roles having different paint schemes. Roles is a key one. I think about Hunter's describing Landreich ships as being painted "stealth black" at one point in Fleet Action.
The Excalibur in Wing Commander III is probably an example of "stealth black". My guess is that the green ships in the earlier games harken back to the first days of the war, where the role for carrier-based fighters was supposed to be largely space-to-ground operations (actually, one of the novels mentions "ground camo" on a Kilrathi fighter).
I think it's not a coincidence that the paint schemes follow World War II--with specifically camoflaged spacecraft giving way to unpainted ships with only unit markings as time goes on.
In terms of cap ships, I think it's largely unit based. Remember that the 'red' Border Worlds ships in Wing Commander IV are fighting for a fleet that came into being a few hours earlier (and we actually see them before that)--so they probably come from a particular Confederation fleet which had red trim rather than the blue seen in Wing Commander III.