What grammatical role is "blood" playing in the phrase "blood red"?

"Blood red" can be both a noun and an adjective:

Blood red is my favourite colour. [noun]

The wall was blood red. [adjective]

The "blood" is optional in the sense it can be removed without grammatical effect:

Red is my favourite colour. [noun]

The wall was red. [adjective]

When "blood red" serves as a noun, then "blood" is a noun that's modifying another noun, "red", attributively (i.e. in the same phrase) and is optional, so by my understanding "blood" is acting as an attributive noun. But when "blood red" is an adjective, "blood" seems to be a noun modifying an adjective instead. Is "blood" still an attributive noun in this situation?

My question also seems to cover compounds like "brick red" or "forest green" (though I suppose not "royal blue" or "deep velvet" and presumably not "racing green" — is this correct?) and is somewhat related to this question about hyphenation.

"Blood" is being used as a noun adjunct to modify "red" as a noun. The two nouns, "blood and "red," are then put together into a compound noun that becomes a noun adjunct that forms the adjectival modifier "blood red" or "blood-red."

Well, that's how it was initially. Now, though, it's in the dictionary as a compound adjective. When you have entire phrases take on a meaning, whether they be idioms, compound nouns, compound adjectives, phrasal verbs, or whatever, the entire group of words is an entity that grammatically no longer can be parsed. That means that "blood" is part and parcel with "red" in the usage and cannot be grammatically analyzed separately, not that everyone strictly follows that rule as your example illustrates.

Incidentally, this is the case with many colors. Consider "sky blue." "Sky blue" is a noun that formed out of "sky" being used as a noun adjunct to describe a certain hue of the noun "blue." That then became a compound noun that in itself became a noun adjunct to describe other nouns of the color it denotes, although like "blood red," when used as a noun it's "sky blue," but when used as an adjective, it generally takes a hyphen between the two. Now, though, "sky blue" is in the dictionary as a compound noun, and "sky-blue" is listed as its adjectival form. As such, liked "blood red" and "blood-red," it can no longer be grammatically parsed into separate words but rather are to be taken as a single whole.

It's important to distinguish compound words and syntactic constructions.

When used to modify a noun, "blood-red" is a compound adjective, a single word consisting of the two bases, the noun "blood" and the adjective "red", as in "a blood-red rose". Sometimes the colour adjectives are intensifying, as in "jet-black" and "snow-white", while others such as "steel-blue" and "brick-red" simply specify a particular shade of the colour.

When used as a noun, "blood red" is not a compound word but a syntactic construction consisting of two separate words, both nouns: the noun "red" as head and the noun "blood" as attributive modifier, as in "My favourite colour is blood red".