How is turpentine used to make colored paints?

Either will work. It depends on how thick you want it to be, how thick the paper is, and whether you care if it bleeds through or not.

I think acrylic paint with water mixed in would work well here.

An easy way is to use a mixture of water, vinegar, soda and dish washing liquid. Rub the paint brush gently and you will get desirable results.

Yes. It should work just fine. Because it's a porous material, the paint should not rub or wash off.

Card stock or other thicker paper is advised and, yes, you can use colored cards.

Acrylic paint shouldn’t damage your plastic model, but it won’t hold up as well as some other types of paint. You might want to avoid acrylic if your model is...