Is it ridiculous to have a color scheme in a living space the size of a postage stamp?

The other day I was on my way to a new hair salon (to scope it out before deciding to trust them with my very difficult hair, but I digress) and naturally, my cell started ringing the second I began driving.

On a whim, I answered. Usually I let calls go to voicemail since I'm not the most experienced driver on the planet, but I thought it might be important for some reason - and it was! (Maybe I'm psychic?). My roommate was perusing her local Bed, Bath and Beyond and needed to discuss storage options. We're thinking an ottoman might be nice. And just in case any officers of the law are reading, I was using my hands-free setting the entire time.

This brings me to the topic of this post: decorating schemes. I'm wondering if there's a point on the small-living-space scale where trying to coordinate things simply becomes farcical. I mean, we're one step above Genie's living situation in Aladdin (quick refresher for anyone who hasn't Disneyed it up in a while: he lives in a very small but classy lamp.)

And that's what we're going for with our subtle, vintage-inspired color scheme, illustrated here:

Small but classy. How do you incorporate color into small spaces?