I toyed around with the concept this summer. It works, however, it adds a new layer of organization (and therefore, another layer that require's my stupid head's attention -- which is in short supply believe me!) to the stylesheet. In theory, I guess your supposed to know what you are doing -- however, as I attempted to organize colors, I began to realize that the php css method becomes constricting in a way, and before I knew it I had 12 different colors strewn about the stylesheet that my brain couldn't possibily remember. Moreover, I would end up liking one color in one place, but not all the other places that I assigned the color variable -- then I'd add a new color to the variables, but completely change the color scheme.

Did I mention I sometimes get neurotic when I play with CSS?

Of course, I was just playing around, and am ADHD by nature. I wouldn't be in the slightest bit suprised if someone managed to figure out an organization of variables in a stylesheet that both made styling easier, and provided room for all those little tiny edits we always end up putting in our style sheets. I'm just pointing this out as a word of warning -- something to keep in mind as you go down the path -- for it is a path that must be explored.

adrianR is working on this. he will talk about it at drupalcon in his themeing talk.

also, we had this feature in a great contrib module drupal 4.3 - http://cvs.drupal.org/viewcvs/drupal/contributions/modules/style/

1) CSS is easy to grok. A person looking at CSS will be able to change some basics very easily. No UI can beat that power
2) CSS is extremely powerfull. You simply can never ever capture that power in a UI (that is probably the reason that there are no desktop WYSIWYG CSS editors too)
3) PHP adds extra overhead. I use dynamically generated javascript in quicktags. But it requires drupal to load completely once for the page and once for the JS. This is a lot of overhead
4) how often does on *really* change the CSS? For me it is "often", but it is always done in a batch, not now some margins, tomorrow some lines. Even with the client sitting next to me, I can show the changes immediately by working over (s)ftp. And otherwise the Firefox webdeveloper plugin helps there.

I personally doubt that online style editing is as much needed. what we really need is good default themes/styles and much cleaner default code in Drupal. A simple effective theme takes only hours to develop, when you ave such a solid base.
A UI is not going to change this. The theme that can be altered with that UI has to be good in the first place. and when its good, its just as easy to simply edit a CSS file and change a few lines in there.

Along with a very powerful javascript colour picker that steven wrote for us.

There was one modification i needed to make to core, and that was weighting stylesheets, as the overriding stylesheet needs to take over from the other stylesheet.

I also used phptemplate and just made a phptemplate_style(), which automatically makes style.tpl.php loaded when found.

Some things you should consider though :
Derivitive colours :
for simplicity, you don't want to let the user select all the colours. The simplest one that should be available by default is all colours selected should have lighter, lightest and darker , darkest monochromatic colours automatically generated for them.
Complimentary colours :
Be able to autmatically select different colour schemes based on mathematic formulas. This is the best way to get default colour schemes which work well (based on the colour wheel)
Image composition :
unless your theme is _incredibly_ simple, you will need some images. and those images need to keep track of the changes of the colours. So that the background can blend back in.

I spent a lot of time working with imagemagick, and putting together 'image composition recipes' , ie: changing the background fade colour of the header image of pushbutton when you change the background colour. I finally found a library for image magick written as a php library, but i couldn't get it working on OSX without recompiling php..

There are more interesting things for this , like
1) sourcing stock photos.
Be able to use flickr as a source of photos, by using a colorpickr database (http://www.krazydad.com/colrpickr/index.php?group=stock)

He did that by downloading all the images, and resizing them to
1px x 1px and saving the colour value to a database. We could do the same, and each time the module gets updated add a bunch of photos.

If you've seen flickr's avatar selecter, you could use that for cropping your photos too.
2) get colour schemes from images
upload a logo image, and it picks out the colours for your site itself.

3) live preview
this is all incredibly simple to make happen with a live preview, as you are changing the colours, the page changes right in front of you.

Another thing i wanted to see finished first is my revamp of drupal's layout / theme configuration system. To allow for flexibly switching between multiple styles, ESPECIALLY allowing each user to have a style selector for their own blog / site.

I designed this all with my site oasismag.com in mind. I want to have all the users on the site have their own domain / subdomain (mysite.oasisjournals.com) and have their own look and feel on there, but still use my markup and my style structure. IE: no horrible myspace like sites.

One benefit of using dynamic css is the ability to detect browsers and deliver customized style information without using css hacks or javascript detection that may be turned off. By getting the http headers, you can find the browser from the user-agent. It not only detects browser type (all of them, not just IE or Firefox), but version as well (helpful when detecting IE7 vs. IE6).

I add this at the top of my css doc:

And add a conditional statement where you need to deliver different information to different browsers.
----------------------------
div#test {
width : 100px;
height : 100px;

}
------------------

Then you can use one stylesheet doc instead of one for each browser that displays css differently.

Here's an example: http://www.digitalbonsai.com/phpstyle.php

I now this post is old but i stumbled across it and noticed so I thought I'd make a note that

Just in case anyone is confused as I was when stumbling across this nice little tidbit.

it’s work gr8

thanks