It is a screenshot from 1.4 but that was when I first downloaded it. After buying all the colors and some new hairstyles, I went to change my avatar and my options suddenly reset to these six options (it affected hair and eye color only).
So I just clicked on outfit for the first time and all the correct options were there. I think I assumed that button was only for your clothes (but then I just my clothes in the looks as well, idk. I'm usually playing the game when it's late). Anyways, because I was intending to work on clients and buy everything before working on outfits, I never pressed the button. Anyways, sorry for the trouble but I hope I shed some light on whatever is occurring for you.
Yeah as I suspected, nothing is wrong :p
Everything is working as intended. You get limited colours when you click "Looks" because that affects CGs. But you have all the colours available when you click "Outfits". Changing your looks is for people that want to change hair/eye/skin colour in their CGs.