um could be better. but i do like to options you incorped in to it.
heres an ez one..

on *:input:*:{
  if (%rainbows == on) && (/* !iswm $1) {
    var %x = $len($1-),%y = 1 
    while (%y <= %x) { 
      var %z = $iif($mid($1-,%y,1) = $chr(32),$chr(1), $+ $rand(0,15) $+ $mid($1-,%y,1)) 
      var %zz = %zz $+ %z 
      inc %y
    }  
    msg $chan $replace(%zz,$chr(1),$chr(32)) 
    halt 
  }
}
menu channel {
  .Rainbow Colors
  ..On:{ set %rainbows on | echo -a Colors Are Now On }
  ..Off:{ unset %rainbows | echo -a Colors Are Now Off }
}