Is it possible to set individual options out of stock ( or disable in some way, we are not using inventory) in Magento. My client has different colours of her products and if one colour is out of stock there seems to be no way to set that out of stock other than actually deleting the option and putting it in afterwards.
If I am reading your question right, it sounds to me that you are using a color attribute here?
You should be using configurable products, with a parent product, and then each color represented as a child simple product. Then if the child product is out of stock, it can thus be set that way, which will remove it from the available list of child products for the configurable in the frontend. Once the child is set back in stock, it will re-appear in the selectable list.
I agree with dedmeet's answer, if you find yourself that you need stock for custom options you should create configurable products. Custom options should only be used if no matter the choices you are still delivering the same product from your stock, e.g. when the user can personalize the t-shirt. Yet, if you find it hard to change your product schema at this point, the Advanced Product Options extension (http://www.magentocommerce.com/magento-connect/advanced-product-options.html) will allow adding stocks per option.