blue, purple, yellow items?

What's the difference between the different colour labels on items? all i noticed was that blue was more common, followed by purple then yellow. yellow listed the item as 'rare' but i was quite disappointed when i ided them and only found 1 stat. generally purple and yellow items have higher base stats but thats about it.

Can anyone tell me what the different colours mean or did they just add colour for the sake of it?

not sure. From blue salvageables I salvaged a minor rune from time to time, purple gave me the only major rune I got (smiting prayers). Blue weapons sometimes gave you a component, purple didn't. I find when salvaging a salvageable that says "Improves Air Magic" for example, with an expert salvage kit, you can still get screwed. I remember salvaging a purple one that said "Improves Swordsmanship, -50hp" for a Major Rune, got 7 wood planks. Was I ever angry.

i have heard that the chance of getting a major rune with the expert id kit is about 1 in 4

I had the same thing happen to me too (once I think). I had an awesome "unique"/rare item and when I used the expert salvage kit it reduced it to a lot of raw hides! That was infuriating... what can ya do though, right?

I think I got my best axe while I was out in the Wilds with my guild a few hours before the end of the BWE. Sadly it would have to be the end of the BWE and the final one too before the wipe before retail. Its yellow (as you can see) and was really quite handy for me. It was the only treasure that popped out of a chest that was actually worth quite a bit to me. I also unlocked a special item after I identified it too. It has a few skills attached to it (not just one) so I must have been lucky.