me@yourlaptop $ xtensa-lx106-elf-gcc -v ... gcc version 4.8.5

What is old about this, the 4.8.5 version of GCC was was released June 2015.

The 4.8 series was originally released in March 2013. There have since been three major releases (4.9, 5, 6). GCC 4.8 is old.

I didnt even know, Im happy with the toolchain, what am I missing from the latest gcc releases? Better colorful error output, more optimizations?

The code generation, especially on RISCs, has improved pretty dramatically between 4.8 and 6.2. You can expect to get better code size with a newer toolchain.

That said, there's a good chance it's not too hard to forward port the patches; I'm not aware of any major rearchitecting between 4.8 and 6.2, then again maybe there's been one.

Since when does gcc give out colorful output, and how do I get it to do it all the time?

Add this flag to it -fdiagnostics-color=always

If you dont want to mess with gcc flags in all your projects, add the GCC_COLORS env variable to your shell, like just export GCC_COLORS='error=01;31:warning=01;35:note=01;36:caret=01;32:locus=01:quote=01'` to your ~/.bashrc or other shell rc.