I'm using FPD's T Shirt template, any time I use the color picker to change the shirt color, the shirt
turns grayscale. Any ideas?
The demo works fine for me. Did you change any settings (p.e. opacity of the shadow layer?) You can try to download the demo and try again.
If this doesn't work please go to Fancy Product Designer -> Settings -> Default Elemet Options -> Custom Image Options -> Filter.
Make sure you didn't select grayscale and select none instead.