Always, obviously.

The visuals in dreams are the same that your vision is used to. Only without the realities of eyes and effects like weather and dust etc, unless they're a part of the plot. Dreams are like hyper real quality images with the detail that you don't notice left out. That's what the brain is capable of synthesizing and that's what another part of your brain expects to experience.

It's possible to see greyscale dreams if it's a part of the plot. I was just in a dream where I was in a grey city in grey clothes. I remember vaguely a long ago dream that was pretty colourless because it was dark and snowy. Also, one dream I was out standing in rain that was so dense that all I could see was a grey wall of water in every direction. They were all colourless for plot reasons.

Things brains are generally good at showing: colourful, familiar images. Things brains are not good at: steady images of text, causality. Try reading a paper in a dream, watch a digital clock, turn a light switch. Look in the mirror if you dare.

Yes, I've practiced recall a bit and used to keep notes. And done some studying a long ago.