1) Colour isn't only produced due to energy transitions of electrons. For example, some compounds' colours are due to the way they cause light to refract and the interference which occurs as a result

And I think you've misunderstood the teacher. The transition metal doesn't "produce" light as it were. It absorbs the photons of one energy, then scatters it again in a random direction, so, for our intents and purposes, we can imagine that that's been removed from the spectrum. So the original white light you shine on it is no longer white, but coloured.

2) It's due to the Wien's displacement law, in particular this graph.

The different stars are all at different temperatures.
Hence different parts of the visible spectrum dominate:
- if all red, blue and green are roughly equal, the star appears white
- if there is only a small tail into the visible region from the IR side, it appears red
- if the same happens from the UV side, it appears blue

Both of you are correct: it's due to the collisions giving enough energy to promote electrons to higher orbitals. When they drop down, they release photons of energy corresponding to E=hf.

Hope I've been of some help