As long as you have a mixed age group then your room has to cater to the youngest in care to be safe. Ie leaving markers and scissors out may not be the ideal. I see nothing wrong with you determining when it is craft/playdough as that is what most of do that have little ones.

I understand the red/blue concept. This is done to limit the amount of time the kids get to just play such as with blocks or the farm set and forces them to choose other things such as fine motor so for example you could use a cupboards and open one for them to choose from for the first hour of play and it could have things like fisherprice playsets, large blocks and trucks, then have snack and then open the next cupboard and it could have puzzles, lacing cards, small lego, peg boards ie manipulatives. The idea is that while they still have lots of options to choose from you are forcing them to choose from a type of activity or what you want them to learn. As for the what to learn you could have one cupboard that is only letter activities but they choose if they want to make a letter puzzle, or toss letter beanbags into a bin.