Being among the clouds likely meant that your guide comes from what you may call the Upper world, a place of light and higher awareness and understanding. As to the different colors, I know there are specific colors attributed to the chakras of the body, though I'm not well-versed in that school of thinking. They could well mean something else altogether, of course. I love the image of the library! I've been in a library of my own several times. It's a repository of knowledge, both that with which you're already familiar and that which you have yet to learn. The picture in the book is your starting point. It's illustrating to you that there are things about yourself that may be holding you back from advancing in your growth. You may find that as you progress, your picture will become increasingly freed up. The text was blurry because there are things in this book waiting to be learned, but you are not yet exactly where you need to be to learn them.
I'm sorry I don't know what to say about the town. There may be something or someone you'e supposed to find over there. Continue to seek the counsel of your guide regarding both the colors and the town. Hopefully these things will become clearer as you progress and grow.