So, since there doesn't seem to be a lot of info on the border crossing at Colon I thought I would share my experience.
I decided to go to Colon not only because I wanted something different from Colonia but also because I had overstayed my visa and was a little concerned that I would be hassled if I went to Colonia. I ended up going by myself and was completely expecting to pay the 300 peso fine (and maybe a little extra if needed
To cross the border at Colon you have to take a bus to Paysandu, Uruguay (unless you have a car) which I caught at the bus terminal in Colon. Before I got on the bus I had to give my passport and customs form to the bus driver who held on to them for the crossing. When the bus got to the border the bus driver gave all the documentation to the immigration officials and we all stayed on the bus. Two immigration officials came onto the bus to check our bags to be sure we didn't have any bombs or something, then we were given our documentation back, stamped and all. I was shocked; I was sure that someone was going to call me off the bus to pay the fee. So, we went to Paysandu (which is nothing fabulous and rather depressing), I had lunch there and then caught the bus back. Same procedure: gave my passport to the driver (same guy, haha), we went through the border and didn't get off the bus. This time no one even came on the bus to be sure we weren't carrying anything illegal. I got off the bus in Colon and got my passport with a new tourist visa, no problem. So, by going to Colon I saved 300 pesos because I'm sure I would have had to pay if I went to Colonia. I really have no explanation for it.
The trip, price wise, is actually pretty comparable to going to Colonia on the buquebus. My bus ticket to Colon (there and back) was less than 100 pesos, my VERY nice hostel was 100 pesos for a private room with my own bathroom, television and heater as well as breakfast, and the bus (round trip) to Paysandu was 18 pesos: that right there is roughly the same as the boat to Colonia (last I checked the 3 hour trip was almost 200 pesos and the 1 hour trip was 275). Plus the food is pretty cheap and Colon's main attraction (the thermal pools) cost 10 pesos to get in for the whole day. You could always try to do it in one day and save even more money (the bus from Buenos Aires is about 4 hours one way) but that doesn't seem like a very pleasant trip.
As for Colon itself; it wasn't the greatest. The weather was bad (rainy and cold) which meant that the dirt roads were all mud and sludge (of course there are few sidewalks as well) and you have to walk everywhere because there are no public buses. The town would be quite charming, I think, in the summer, or even if the weather had been better because it's small and very quiet, but it's obvious that Colon depends on tourism in the summer because it seemed rather empty (I swear I saw more dogs than people). Frankly, there just wasn't much to do.
So, all in all, I would definitely recommend Colon to anyone who has overstayed their visa, or is concerned in any way about renewing. I would especially recommend it if you want to go in the summer, but if not then try to pick a weekend with good weather and bring a friend!