The first bit is relatively straightforward:
The first action, Ask for Finder Items, can be customised depending on where you want to start searching. Leave the type as Files and don't Allow Multiple Selection - unless you want to be able to label multiple items with the same colour.
The next action, Label Finder Items, has its Options set to Show this action when the workflow runs. This will let you choose a different label colour each time you run the workflow.
Try setting up this workflow and see how you get on. It will prompt you to choose a file and then choose a label colour for it.
Moving the labelled files depends on what you mean by "appropriate" folders, and adds a lot more complication. It would probably need a Run Applescript action to determine the "label index" of each file. This is a number from 0-7 paired up to the colours of the labels. (The colours aren't displayed in numerical order. That would be too easy ). You would need to decide where to keep the folders, and what to call them, and what to do if one of them accidentally got deleted or renamed.
All of that is possible, but you need to decide how you want to set up your folders first.