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Yes but food coloring stains the tubing and has some sugar in it and after repeated heating/cooling could clump and then your buying new tubing/pump/whatever goes wrong
Actually, that won't happen with food coloring. The bad thing about using food coloring alone is that it does nothing for stopping corrosion. Corrosion is the killer when it comes to water-cooled rigs. You can add a little anti-freeze with the distilled water and food coloring, and you will never have any problems. After-all, you don't use anti-freeze to keep the water from freezing. I ran a WC'ed rig for months with red food coloring in the tubes, my blocks and pumps looked brand new when I switched and went with dye.
Now...The food coloring will stain your tubes. That's true, but it won't kill your system any faster than anything else.