I'm guessing that powders mixed into the color are probably the backwards way to go about it.

Have you ever noticed how something with a lighted keypad works? For example, the lighted keypad on a telephone.

It's made of a milky white plastic. Sometimes it's a rubberized flexible plastic. If you just looked at it under normal light, it would look pretty much solid white. But when you put a backlight behind it, it's transparent enough to allow a certain amount of light through.

I'm thinking that you probably want to start, as a basis, with a white plastic and see how translucent you can make it. As opposed to the opposite thing of starting with a clear plastic and seeing how opaque or diffuse you can make it.

I already made one modification to the knob on my player that diffused the light behind the knob significantly. I took some milky white sheet plastic that used to be part of Rio/Nike portable MP3 player package. It was vacu-formed sheet plastic which happened to be translucent white in color. I cut it into the shape of a circle, with a hole in the center that was the same diameter as the shaft for the knob. This fit perfectly atop the knob-board and LEDs, and spreads the light out evenly so that the knob lights almost solid now.

I was unable to do the same thing with the buttons due to their complex shapes. But what I'm thinking is that this kind of milky white plastic material could be the beginning basis for a different style of knob. Perhaps white or even light gray, with just enough translucence to allow the light through. They could simply shine in a gray/white tone, and color could be chosen by an insert over the LEDs themselves.

I am absolutely certain that this kind of plastic exists, as it's used in making the buttons to many car stereos with backlit buttons. Heck, I've still got a Sony CD player whose buttons are made of this kind of plastic. The only question is finding it and seeing if you can use it in your particular mold-making process.