Bash on Snow Leopard doesn't obey terminal colours

The answer was actually much simpler. Rather than using \e for the escape character, use \033 instead. So it goes from

export COLOR_NC='\e[0m' # No Color
export COLOR_WHITE='\e[1;37m'
export COLOR_BLACK='\e[0;30m'
export COLOR_BLUE='\e[0;34m'
export COLOR_LIGHT_BLUE='\e[1;34m'
export COLOR_GREEN='\e[0;32m'
export COLOR_LIGHT_GREEN='\e[1;32m'
export COLOR_CYAN='\e[0;36m'
export COLOR_LIGHT_CYAN='\e[1;36m'
export COLOR_RED='\e[0;31m'
export COLOR_LIGHT_RED='\e[1;31m'
export COLOR_PURPLE='\e[0;35m'
export COLOR_LIGHT_PURPLE='\e[1;35m'
export COLOR_BROWN='\e[0;33m'
export COLOR_YELLOW='\e[1;33m'
export COLOR_GRAY='\e[1;30m'
export COLOR_LIGHT_GRAY='\e[0;37m'

to:

# Setup some colors to use later in interactive shell or scripts
export COLOR_NC='\033[0m' # No Color
export COLOR_WHITE='\033[1;37m'
export COLOR_BLACK='\033[0;30m'
export COLOR_BLUE='\033[0;34m'
export COLOR_LIGHT_BLUE='\033[1;34m'
export COLOR_GREEN='\033[0;32m'
export COLOR_LIGHT_GREEN='\033[1;32m'
export COLOR_CYAN='\033[0;36m'
export COLOR_LIGHT_CYAN='\033[1;36m'
export COLOR_RED='\033[0;31m'
export COLOR_LIGHT_RED='\033[1;31m'
export COLOR_PURPLE='\033[0;35m'
export COLOR_LIGHT_PURPLE='\033[1;35m'
export COLOR_BROWN='\033[0;33m'
export COLOR_YELLOW='\033[1;33m'
export COLOR_GRAY='\033[1;30m'
export COLOR_LIGHT_GRAY='\033[0;37m'

My Terminal is showing colours.

Try using something like:

PS1='\[\033[01;31m\]\u@\h\[\033[00m\]:\[\033[01;33m\]\w\[\033[00m\]\$ '

And see if the colours appear.