So, from what I recall from my Douglass Adams, the nice thing about a towel isn’t just that you look like a respectable creature, but that it serves as:
* and, of course, a towel.
So a towel shawl should be of appropriate dimensions to be minimal clothing and blanket. On me, that’s about 5 foot by 25″ (chin-to-floor by half shoulder circumference). It needs to be towel-absorbant, and not a lacy pattern, or at least not primarily lacy, although one could probably get away with a pattern down the center.
This looks like a good base to work from
I’m picturing a wide seed stitch border around all 4 sides, fringe on the narrow ends, and possibly a lace or texture pattern down the long center for knitting and visual interest.
Now! Rainbow. The easy way I can see to do this nicely is wide stripes of color transitioning in Fibonacci narrow stripes to the next color.
Yarns, quick options: