Heroes 5.5 WarGame Edition - Tactical Edition.

The downside of this idea is that the basic creatures in the recruitment window will be the same, regardless of the chosen primary color. The recoloring only happens during the actual recruitment (replacing creatures), not during the preview. This can create some perception issues.

Then we should abandon the recoloring idea. Let the difference be in the starting armies.

For example, you have an Inquisitor hero with Fanatics and Archers as starting troops (red). Does this mean that until you get upgrades for Militia and Archers, you won't be able to recruit reinforcements for these units?

What difference does it make if the hero has low-tier upgrades or high-tier basic units in the starting army? Either way, you need to build the corresponding building to replenish losses. An extra building to build isn't that much of a burden. Instead, each hero will have an additional building as a priority, which will add its own interest to playing as different heroes.
In my opinion, we should create thematic, balanced starting armies and not use recoloring.

P.S. And regarding the +1 morale (10% chance of "triggering") if the hero's squad has a "native upgrade," is that really such a big bonus?
In the standard Heroes 5, players initially recruit creatures from another castle with a -1 or -2 morale penalty for testing purposes.