So she only remembers that orange and purple together is garish when Carlos' isn't blind?
Oh Tummy, I think you have missed the point. I don't think it was that Gaby forgot how to match colours, but more that they really wanted to frump her up to show that she had sold all her fancy clothes to make ends meet. I suspect most of the frumpy clothes came from some sort of discount clothing place (Salvation Army?) and maybe matching colours were not available/economical. Sure, that is a stretch, but compared to the other stretches these shows ask us to believe maybe not a huge one.
About the accident, I found this:
The little girl does have blond curly hair. Funny, but from looking at the actual accident scene I would not expect anyone in the car (vs the truck) to have been injured, as the car barely moves whereas the truck rolls.
Even if this was Dave's family in the car, and they were killed, there is still a big gap to explain the "criminally insane" part. I am inclined to think it goes back to the prison thing.