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>>/42791/
> Do they associate colors with cardinal directions?
Yep.
You'll notice that above the dohyō (the ring itself on that clay platform) a roof is suspended, with four coloured tassels in place of where there would normally be pillars. They point towards four cardinal directions: green for east, red for south, white for west, and black for north.
Originally, those were actual pillars - they were replaced to prevent unwanted injuries from bumping into them when thrown out of the ring. Or, the official excuse is, because they were blocking clear view of the wrestlers. Because as we all know, big guys aren't afraid of getting hurt a little.
> What are those big waifu pillows hanged onto their front?
Keshō-mawashi. The wrestlers wear them for the ring entering; the ornate part is actually just one side of what's otherwise a normal loincloth (mawashi) like the one they wear during bouts. They're donated by sponsors and the design is often some kind of an advertisement.