Without a window, I would be very leery of turning this room into a bedroom. I understand not being able to afford to put in a window now, but would it be possible to do that sometime in the future? In other words, is it at least architecturally feasible to put in a window? Obviously it's much easier if you've got siding. However, you might be surprised at how cheaply you might be able to put in a window. It could be something to consider in the future.
At any rate, that's not really what you asked. You asked what would be better for this room: a bed or a futon? If it's not primarily being used for a bedroom, I ABSOLUTELY would go with a futon. We have a game room, and we've got one sleeper sofa and two futons. The futons are light and easy to rearrange, and yet we've got plenty of room for the kids' friends to sleep. They're also a lot more comfortable to sleep on than a sofa bed. They're not quite as comfortable when used as a couch, but add a bunch of squishy throw pillows and they're fine. Our futons came from Big Lots (not a place we'd usually shop for furniture!). They have black metal frames with oak armrests, and we got black futon mattresses for them. I think they ran about $200 - $250 apiece. Garden Ridge also had futons, but the ones at Big Lots were better quality.
I can't help you with the color, but I would go with something light since the room doesn't have windows. Bright colors are really in for teens these days, so maybe leave the walls a light neutral color, then get bright throw pillows and blankets. At our house, I swear -- no matter how many of those fleece throw blankets we have, someone is always looking for another one!
Anyway, don't spend much on the decor. Use your money for a TV/stereo/game system for that room. *That* will keep teens occupied!
Since there is only one exit from the room, I would put a smoke detector both in the room and in the hallway outside. Also, while you'll likely want a door for noise control

, you might want to have the rule that once they're ready to go to sleep, the door opens.
I'm sure I sound paranoid, and I likely am when it comes to fire. Good luck with whatever you decide to do!