It’s just a guess, but when you use colour dust on gumpaste, you steam it to set the colour and prevent bleeding. I imagine that because the sugar hasn’t been set, the dust is bleeding. Store bought sprinkles are typically made of coloured sugars, so the colour is all throughout and part of the pieces, not just a dusting on the outside. That would minimize bleeding.

My guess is that they have placed each tier on a turning table that can be tilted. This make it more easier to add/pipe details to the side of the cake. I would use a thin coat of piping gel that is almost dry (tacky) to the surface, so that the sugar wont dissolve.

I recently attended a wedding expo. I saw a cake that was done in pink sugar that sparkled. Does anyone know how to get the colored sugar on the sides without a big mess?