If children are doing something like coloring or painting, do they have to use the "real" colors of the objects they are filling in, or are they allowed to use other colors? Would it depend on if it was going to be displayed or not?
My take on it is, they're children and soon enough their choices will be restricted. They'll develop into wanting to be representative all on their own without prompting. Let them choose. As far as allowing or disallowing, that might depends on skills being taught. I know that my nephew was given a color sheet with a list of colors to choose from. I think the intent was to teach colors rather what color certain objects are. Still, as a former art teacher, restricting choices in terms of skills versus creativity, I lean towards allowing more creative choice.
Unless we are doing science where they are documenting an object-I always let them use their imagination. If they ask "what color should I color this?" my answer is always "you are the artist". We did owls as an art project recently-one of my students gave it sunglasses and a purse, one only gave it one eye (an owl-clops, he said). I love that they are all different and not some cookie-cutter idea of what it should look like.
I suggest you read 'The Dot' by Peter Reynolds http://www.amazon.com/The-Dot-Peter-H-Reynolds/dp/0763619612 Or 'The Art Lesson' by Tomie dePaola http://www.amazon.com/The-Art-Lesson-Paperstar-Book/dp/0698115724
As KinderCowGirl pointed out...unless I have a specific purpose for the "art", then I let them be free. Want purple pumpkins and blue polka-dotted deer? Go for it. We're in a world where creativity is slowly being hindered. How many times do I get: "Mr. M. I don't know what I want to write about? May I write a Pokemon or Minecraft story?" If I tell them they have to make up a story...they groan. Times - they're a'changin'.
It's all about the process…not the end product. There is nothing better than child created art and if it's put on "display" somewhere, even better. That's my take on it. I teach colors and the usual correct colors of things. They like that information. It helps them grow. However, when they ask if they can color their trees purple and animals rainbow colors, I tell them it's their work and they can do whatever they choose.
Much depends on who it is that thinks that the children have to use the "real" colors (and I like your use of scare quotes: "real" in this case is very, very relative). If you're being leaned on by an administrative type, grump. I might consider having some projects that will make this person happy, and I might have other projects that are none of the administrative types darned business. If you're being leaned on by a parent, smile gently and praise the children's creativity. The kid who can see chartreuse in the sky has a gift. If this is coming from some of the kids, I'm incredibly sad.
If it's for something in science, social studies, or writing workshop (personal narratives), then we use real colors. If it is art, coloring pictures for phonics, or writing a story on their own, I let them decide.
My son drove his grade one teacher crazy--for 3 months, he coloured everything brown. Looking back, he just may have done it because she caused such a fuss about it.
For science diagrams, social studies maps and learning colours I insist on the correct colours. For everything else they are free to choose. My art lessons are process based, not product focused, so the kids have a lot of freedom. I given them all the same supplies, walk them through the same steps, and they all turn out completely different. I love it and so do they!