Here is how to make dyes, and to dye items.
Skill to use | Item | Second Item | Result |
Alchemy | Mortar and Pestle | Plant | Chrushed Plant |
Alchemy | Crushed Plant | Neutral Balm | Dye Oil |
Cooking | Cooking Pot | Dye Oil | Cooked Oil |
??? | Cooked Oil | Armor/Clothing | Dyed Armor/Clothing |
NOTE: If you screw up, you will lose a max (I think) of 50 AL and/or change the outcome color. You can also mess up your cooking pot. This dying process requires a skill of 220+ in both Alchemy and Cooking.