I'm looking forward to see other people's systems and find out how to make mine better! :^)
Currently I sort my kin list as follows:
White - No one's white, what the hell
Green - Ultimate access, alts, really cool kids
Red - KoS!
Dark Blue - Allies (supa close)
Light Blue - Fellow villagers (not full access)
Yellow - Allies (but who are they?

Purple - Who even uses this color... so ugly.
Pink - Ditto.
As for name editing:
Prefix - Relation
`~ - Alts (First to show up on list)
~ - Villagers (Second to show up)
\ - Dead (Shows up last)
No prefix for anyone else
Format of name:
[VillageName]KnownName (CharacterName)
for example(W3 examples):
`~DatOneSlave
or
~burg (burgingham)