I opened the water holes on mine this weekend... well, the big ones at any rate! I used a dremel bit and ground away the inside until I could see the 'ghost' of the hole, then used an X-acto to finish it off. It worked very well. Of course I'll have to put in a 'block' inside to keep from looking straight though the boat on most of them.
If I were going to go after the smaller holes, I'd use a small drill bit and a jeweler's saw with a '0' (size zero) blade.
By the way, I know it's illegal to print swastikas in Germany... just kidding a bit, but I do like the idea of a beer stein in that little circle. hmmm.
Also, looking at old U-boat photos there was one in which the author commented on the 'dark gray' on the lower hull, which was darker than most of the other photos. Like I mentioned above, red registers as black on many black and white films.... Could this be the 'mystery red' hull? Anyhoo, I agree that although I've never seen reference to one, a red hull would look cool.
Are there any accounts from U-Boat crewmen who might remember red lower hulls?
Ron