idk, I was always very "bwuh? wtf?" about it, and no one ever seemed to talk about it and the game never explained it, so I was left wondering where all the missing scene fics for that was.

My personal canon is that Otacon dyed it for the dual purpose of a) obscuring his appearance since he and Dave went into Philanthropy, in order to avoid being recognized by anyone from Shadow Moses, and b) possibly emotionally separating himself from his former life. Y'know, the same way middle-aged women "reinvent" themselves by getting haircuts and whatnot ;)