There's a tutorial on the knitpicks site, I think.... (goes off to search the site)
Yes, on this page -
http://www.knitpicks.com/dye+your+ow..._YL300110.html - there's one using Acid dye, and one for Koolaid. Felting only happens when you have friction like in a washer, and use different temps of yarn. That's more likely to happen to finished items, not yarn strands. You don't have to have really hot water to dye with Koolaid, just warmish, and the stirring around isn't going to felt it.