Hey there Tom, I think I may have a solution.
Make a global variable that is initially "0". We will call this variable "UNLOCKED".
Now when the user beats the game once, UNLOCKED = 1. This can be on any character color.
Now IF UNLOCKED = 1, then give the player full stats on every color with online mode only. If they are playing locally, you can just give them the full stats on the character they beat the game with.
in this example the color of the knights is only important for local play.
Or you could make a basic profile system, and when online play is enabled, ask for which profile name you would like to contribute experience to.
either way would work.
Kirbyzilla
why not let people mini-custimize ( like bettween 3 types of armor sword ect...) so they can tell each other apart. and make the first couple weapons the same for the different colored guys, then make like 3 out of the 17 total weapons are unique to that color.
to bad i have no 360...yet...