If anyone can provide tips on using Kool-Aid with icing for flavoring and coloring please share. It's an interesting combination I would love to learn more about.
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Sounds like you know more about it than I do, just by virtue of having asked a question I wouldn't have known to ask. 
I look forward to what others have to say about this topic!
I don't know a lot, I just know I have seen a few cookies out there that have used Kool-Aid in their Royal Icing especially with colors that are difficult, like red. With Valentines approaching it made me think about it. If I don't get a lot of feedback I may just experiment and share my findings when I am done.
Well I have used other brands of powdered drinks but in cakes, gives color and flavor, but you can risk with the "sugared" powders because they can have other sugared sources and taste bad. I personally used one for watermelon cake and was delicious, but then they changed their formula and tasted bad. For buttercreams they work great too! I don't know for roya licing. Why didn't you taste it? Took 1/4 cup of royal icing and add very small quantities of kool-aid. See the color and verify the taste. And I would say... taste it on the cookie too it could be a strange combination...I love experimenting and taste how things work.
That sounds like a project I need to jump into and see what happens. I think I'll start with sugar free flavors and colors and see what happens. I added left over cherry juice from maraschino cherries and the icing came out a delightful pink and had just a hint of cherry flavoring and also made it much easier to color the icing red without making it taste terrible.