Can you post a photo of him?
As for his color, they tend to brighten up when put in clean, warm water. While at Walmart, he was in an unheated cup. Now, he's in warm water. He's no longer cold, and his true coloration is starting to come out. He'll continue to gain color awhile longer, now that he's in clean, warm water and getting better nutrition.
The original inflammation and labored breathing may have been due to toxins and wastes (such as ammonia) in the store cup. By doing daily water changes, you're keeping the levels of these low, which is allowing him to heal up.
The white fuzz may be Columnaris (a bacterial infection) or Saprolegia (a fungal infection), or it may old tissue that's flaking off. If you can post a photo, that will help us determine if there's something going on with him, or whether it's just the normal healing process.