Why doesn't echo support "\e" (escape) when using the -e argument in MacOSX

I cannot tell you why it does not support that argument (you may have to ask the programmers about that). I only know that on my linux box, I get this:

$ /bin/echo --help
Usage: /bin/echo [SHORT-OPTION]... [STRING]...
  or:  /bin/echo LONG-OPTION
Echo the STRING(s) to standard output.

  -n             do not output the trailing newline
  -e             enable interpretation of backslash escapes
  -E             disable interpretation of backslash escapes (default)
      --help     display this help and exit
      --version  output version information and exit

If -e is in effect, the following sequences are recognized:
*emphasized text*
  \0NNN   the character whose ASCII code is NNN (octal)
  \\     backslash
  \a     alert (BEL)
  \b     backspace
  \c     produce no further output
  \f     form feed
  \n     new line
  \r     carriage return
  \t     horizontal tab
  \v     vertical tab

NOTE: your shell may have its own version of echo, which usually supersedes
the version described here.  Please refer to your shell's documentation
for details about the options it supports.

Report echo bugs to [email protected]
GNU coreutils home page: <http://www.gnu.org/software/coreutils/>
General help using GNU software: <http://www.gnu.org/gethelp/>
Report echo translation bugs to <http://translationproject.org/team/>

• this does not mention \e escapes
• it says that it is /bin/echo from gnu coreutils. As apple changes the source of their unix-system components from time to time (e.g. move from zsh to bash), check if there was a change for /bin/echo between Leopard and Snow Leopard. If it is gnu, you can ask the people at gnu.org why they choose not to include those sequences.

As for workarounds (thats more interesting): Not using /bin/echo, but bash's builtin echo works on linux boxes. If they changed to a bash without builtin echo (or something even more obscure), you could also try this not widely known feature of your shell (works at least in bash and zsh):

$ echo $'\e[34m''COLORS'

This is the matching part of bash's manpage:

   Words  of  the  form  $'string' are treated specially.  The word expands to string, with
   backslash-escaped characters replaced as specified by the ANSI  C  standard.   Backslash
   escape sequences, if present, are decoded as follows:
          \a     alert (bell)
          \b     backspace
          \e     an escape character
          \f     form feed
          \n     new line
          \r     carriage return
          \t     horizontal tab
          \v     vertical tab
          \\     backslash
          \'     single quote
          \nnn   the  eight-bit  character whose value is the octal value nnn (one to three
                 digits)
          \xHH   the eight-bit character whose value is the hexadecimal value  HH  (one  or
                 two hex digits)
          \cx    a control-x character

   The expanded result is single-quoted, as if the dollar sign had not been present.

   A  double-quoted string preceded by a dollar sign ($) will cause the string to be trans‐
   lated according to the current locale.  If the current locale is C or POSIX, the  dollar
   sign  is  ignored.  If the string is translated and replaced, the replacement is double-
   quoted.

Try \x1B instead of \e.

Does \033 still work? If not, you can hopefully press Ctrl+V followed by the Escape key (if a mac has those keys) to create a real control character inside the command line (which does not work that well in scripts of course, depending on the editor)