The color does lighten when it's diluted. But the Iodine solution I got from the LHBS stained the inside of one of my coolers. As far as a rinse afterward the instruction say to air dry, rinsing would probably negate the sanitation. I place sanitized parts in a sanitized bucket and cover. And I turn my carboys and fermentation buckets upside down to dry.
Don't know what you are washing with but I found Oxy Clean Free at the wal-mart today. I have been using regular Oxy Clean but the Free has no fragance or color added. From what I understand it's a whole lot cheaper that PBW.
I have also decided to stop using Iodized salt and get salt that is not Iodized from now on to compensate for any Iodine I might be ingesting.