Obviously I''m quite the OpenGL novice... and there is a probably a simple solution to my problem, but I can''t seem to find it. So... I have an object which I use smooth shading on, and I have specified a color for each vertex, and this works great (colors blend just as the should), however when I setup and enable lighting the object appears in shades of grey. Anyone have any ideas? Do I need to setup material properties in order to maintain coloring?

yes you need to set up material properties to work with lighting. However, there is a very simple solution, simply use:
glEnable(GL_COLOR_MATERIAL);