It seems that you should use the same strand of color 1 to cast on the sts on needle 2 (the righthand side of the circular). You'll be doing this around the needle for the set up row. But it might be easier for this first cast on to use a new strand of yarn. The worst that happens is that you have 2 extra ends to weave in. I tried a small sample and it seems that one of the things to watch out for is that the newly cast on sts don't twist.
Try it with the same strand and see if you can get that to work first and if not, start with a new end.