Why is it that the color produced by the medium and large format cameras are better than colors produced by 35mm (Nikon, Canon, Sony, etc. DSLR) cameras?
Actually, I'm not sure "colors" are much better from medium format. However, I am convinced the image quality is considerably better for all the reasons Doug mentions. But how much all of that impacts just the color is, I think debatable.
Some software like C1 Pro, can render Phase One files with very good color rendition. Some people think Canon's DPP or Nikon's CNX do better color rendering for their cameras than 3rd party software. But I think Camera Raw and/or Lightroom can have very good color rendering as well, if you know how to use it. I would agree that the camera maker's software is often better at default, but I don't use the defaults.
I don't think my P65+ files are any easier nor harder to get good color from than my 1Ds MIII at base ISO. I think the conditions I often shoot one or the other under will have a big impact on the difficulties.
When I'm shooting the P65+ it's usually under decent lighting conditions either outside or in the studio. When shooting DSLRs, it's often because of either lens selection (super wide or really long) or because the lighting sucks...and when the lighting sucks, it's really hard to get good color.
But I think if you are shooting in reasonable daylight with low ISO, the color rendering you can get from DSLR compares favorably with medium format. There's no question in my mind the potential image quality of the medium format will be better.
High ISO, mixed lighting or even warm tungsten lighting is very different from the lighting I would expect to use medium format for. On the other hand, one can get shots with DSLR at high ISO and fast lenses hand-held that you really can't get with medium format. But those shots will be a challenge to color correct.