Age of Fable wrote:A system based on the actual laws of genetics (recessive and dominant traits, some characteristics are government by multiple genes etc) would be interesting, and you might be able to sell it to schools.
Good idea, although I am dealing with fantasy here, so instead of greys, browns and blacks, I have greens, purples, reds and blues! Not sure schools would go for that  

 Plus it makes it tricky when trying to use "real" genetics due to the base colouring - although it would be possible. I am working on the idea of dominant and recessive genes anyway, something along these lines.
The dilution gene is responsible for lightening the Equids coat colour or mane and tail colour. For example;
D+ stallion & D+ mare = D+ foal, 100% chance of dilution.
D+ stallion & D- mare = D+ or D- foal, 50% chance of dilution.
D- stallion & D- mare = D- foal, 0% chance of dilution.
The dilution gene will be inherited as a recessive gene so if you breed two D+ Equids they'll have a double setup of the D gene and therefore you're guaranteed a D+ foal. If you breed one D+ to a D- you will have a 50% of the foal being a D carrier. These will look normal but can pass on the gene to their offspring if bred to a D+ or a D carrier. 
I haven't yet scratched the surface of genetics, but having studied it as part of my degree, I'm pretty much aware of how complex it can be and for now, I think it would be best from a coding point of view to keep it simple, until I have more knowledge or find a coder that knows his beans about this type of thing.