You mean answering an ignorant man's understanding of battalion formation and color guard staffing isn't your full time job? Pity, it should be. Your knowledge of this subject (and of many others, I'm certain) is positively encyclopedic! :-)
You're absolutely right - I did indeed confuse the parade order of the Companies coming onto the Battalion line of battle with the order of seniority of the Company commanders. It makes far more sense for a Battalion to start from the center and work its way out to the flanks than the bisected way in which I had interpreted it. Thank you for "aligning" me! :-)
Similarly to you, based on what I had read, I believe the Color Guard was appointed by the Battalion commander from the "best" men from the Battalion, irregardless of Company and how many taken per Company, though for fairness, I too believe the commander might have apportioned somewhat evenly so as to not give the indication that he was slighting any particular Company and/or favoring others.
I know that, in theory, the Color Guard should be 9 men - 1 Sergeant and 8 Corporals - in three files. Using the two flag system, the Sergeant will be in the center of the first file of the Color Guard, and flanking him will be the two top-ranking Corporals, each carrying one of the two flags. The next two files will each compose three Corporals...
What I'm trying to figure out is, once the Battalion commander has made his choices for Color Guard, do the Companies, from which the Guard was chosen, get compensated for the loss of men? True, we may only be looking at a maximum of 9 men removed from any given Company, but I doubt any Company commander would turn his nose up at receiving "reinforcements", however small, to get the Company up to strength. Besides, the best man/men were chosen, and I'm sure any Company commander would like the chance to get more good men into the Company.
Perhaps hand-in-hand with this is the NCO allotment of the Color Company. For non-Color Companies, there ought to be 5 Sergeants and 8 Corporals. Given that the Color Guard has 8 Corporals (a normal allotment for a Company) and one Sergeant, does the Color Company still keep 8 other Corporals and 5 other Sergeants? I know the Color Guard is sort of like a demi-unit unto itself, but it's considered attached to the 5th (Color) Company as per Casey's/Hardee's manual, so I can see where both scenarios - 1) all Corporals and 1 Sergeant from the Color Guard will join 4 other Sergeants to give the 5th Company its full complement of NCO's, or 2) The Color Guard will join 8 other Corporals and 5 Sergeants of the 5th Company - would have some degree of merit, though I'd be inclined to think Option 2 was the one followed.
I haven't yet come across any literature that answers these other questions of mine, but I'll keep looking.