Sounds like you might need to add more powdered sugar that might help the wilting not sure about the color separating though I have read on here that hot hands can cause icing to separate or that wilton food colors sometimes separate.
This is what you do with a real cake
m.youtube.com/#/watch?v=sI3riDoTnJ0&desktop_uri=%2Fwatch%3Fv%3DsI3riDoTnJ0
I personally think the cake is pretty in all white or maybe red rose but I've seen some done just like this in colors that...