Let's take a look at Danni's explanations:
First, consider there is not such a thing as a "Project" item at the menu, right?
1) To display the portfolio page (as a manu item and to be enabled to show as in the Demo), please create a new page (in the dashboard, under Page item), and set the page template (under the settings options at the right side of the "page" screen, near the other settings) to "Project Archive"
2) then change the slug to "project" (under the title field, you will have the address for that project page. Change the end to "project"). Or add the custom link "http://yoursitename.com/project/" to your menu.
3) Go to the Project area, that is much like "Posts" and "Page" options. Write your specifications for your project, specify the title, add images if you like, and write about your project.
To have an image for each project displaying under the projects list (which is now your projects page, as you set up above), add an image (preferably from your own computer) under the "featured imagem" option, on the right bottom side of the "Project" screen (same for Posts and Pages featured images).
If the page still displays an Error 404, you may need to update your "Permalinks" for the page to work. Just go to "Permalinks" under "Settings", and save it again ;)
Try it ;)
About your other questions:
What text do you mean to change the colors of?
You can add the text "in" the image you will set as a header. Then you will have an image which has also a text positioned as you wish, as a header. ;)