I remember a long time ago that Red Baron 3D, had this feture. Only about 256 squads, but if you had the squad skins downloaded you could see them on your FE otherwise it just went to the default skin. It was great seing 6-7 Fokker Dr1's with different paint jobs. It did make the hot sticks stand out tho.
"If you see a Dr1 with black and white stripes on the horizontal stabaliser, don't engage him without a wingman several in fact. That pilot is really deadly."
"Don't engage that one with the green fusalage with the red stripe, he is mine. He shot me down last time, and I'm out for a little smackdown."
If it could be done back then why not now? The only problem was the skins file if you downloaded the lot, it was huge. But it was a personal choice if you wanted to download those skins or not, and you could just download the ones you wanted not all of them. I miss that sometimes.