A newer version of the two color tracking example was just posted that fixes a bug found by a team. The fixes will be included in the version of WPILib that will be in the next update, but in the mean time the changes are included in this project.
You can get the new version from
http://first.wpi.edu/FRC/frcupdates.html.
There is also a problem that was discovered in the FPGA that causes reading the period or rate on an encoder or counter to be incorrect. It also causes unreliable readings from ultrasonic sensors using the Ultrasonic class. We are currently working on a fix for the problem and it will be in the next update. If you are using these features of the library, continue planning on using them but be aware that your results might not be correct until the next update.
Counters and encoders are correctly reporting counts (just not time related values). So using an encoder to measure distance is not a problem.
Since the encoder/counter/ultrasonic problem is in the hardware, it applies to LabVIEW programs as well as C/C++ programs.