Hi,
Active D-lighting (different than D-lighting) actually applies negative exposure compensation in the camera (which is what makes it "active," I believe), in order to help you hold the high tones. Then if you convert the NEFs in a Nikon program, the lower tones are brought back up the same amount, while the highs stay where they were exposed. I don't think the lows are raised in tone in anything but Nikon software, but I may be wrong on that count.
You can set it manually in three intensities, or put it on Auto (or Off, of course). If I had to take a guess, I would assume that Low is -1/3 stop, Medium, is -2/3 stop, and High is -1 full stop EC, while auto picks one of the three for you, depending on what the meter is seeing. I'm really not sure how much is the maximum that it will underexpose on Auto mode. It may be the case that on Auto mode, it will go beyond 1 stop; but I think this is doubtful, as Nikon probably doesn't want people getting badly underexposed shots, even for the purpose of retaining high-toned texture and detail.
So, basically, Active D-lighting is a built-in way to do what digital photographers have done for as long as there have been digital cameras: underexpose to retain highlights, and then raise the shadows in the computer. It is a reverse method of achieving what is done when you overexpose and then underdevelop a piece of film (though due to the possibility of noise and loss of low-end detail and texture, I would argue that the film method will provide "better" results, as nothing is thrown away from the low end that way).
Contrast changes affect the LCD image, tiffs or jpegs (if that is what you are shooting), and carry over into the editing controls of a Nikon raw program. But they do not change the actual sensor information stored in a raw file (though they do encode the camera settings in the raw file so that they can be read by a conversion program); you can change them after the fact if you made the wrong choice with the camera settings. (AFAIK, actual changes to a raw file are impossible. A raw file is simply exactly what the sensor caught, which is used to build an actual image file.) This statement is based on my general digital knowledge, and not the D700 specifically.
Color modes are probably the same as contrast changes.
(Boy, wouldn't it be nice if you actually could change the sensor's physical response to contrast and color! (That is what would be required to actually control what becomes a raw file in the camera.) If that is ever accomplished in a smart way, it will be the thing that truly pushes digital beyond film in almost all areas, in my mind. Wouldn't it be nice to simply dial in the ideal dynamic range to capture the brightness range of each composition, in the same way you would select different films and development routines?)
Unfortunately, in-camera color and contrast settings have no connection to the light meter, as does Active D-lighting. For example, if you were shooting using high contrast and Vivid settings, for the most ideal exposures, you would probably want to expose differently than if you were shooting Neutral or Standard, just like you might expose E100SW and E100VS differently. A workaround to achieve underexposure in these situations would be to apply manual exposure compensation or manual Active D-lighting. Still, more button mashing than should be necessary.
In any digital camera, I always keep the color and contrast settings as flat as possible if I am shooting raw. I want to see the closest possible representation of the "flat" raw file on my LCD, and that is where I want to start when I open the files on my computer. I do set white balance, however. (Never auto; I'd rather have 50 shots with all the same white balance in need of adjustment than have 50, each with a slightly different automatic white balance, most of which need adjustment.)