Some progress --
@theory: I compared it to the page you cited, and the style tag etc. look the same.
I neglected to say that I'm on a Mac, and I'm running MS Entourage 2008...
I tried this: I saved an svnnotify e-mail to disk, and looked at it in Preview. No change, it was still just black and white text. But then I changed the file extension to .html, opened it again in Preview and -presto- the colors appear!
So, the message contains the right markup. But Entourage doesn't want to display it.
I checked the MIME type of the message I saved to disk, both before and after changing the file extension. It's "message/rfc822." I pawed through Entourage settings, and didn't find anything appropriate. It's set up for HTML e-mail, and I can receive messages with color text correctly.
So something is making Entourage ignore certain markup tags in svnnotify's e-mail. Are there useful svnnotify options that I should try? I'm also going to search for bug reports/complaints about Entourage's handling of HTML e-mail, and see if I can find anything useful.