This had been partially fixed upstream. While the backgrounds & emblems dialog still needs resizing to make the contents appear, the actual applying of colors, backgrounds and emblems to folders now works as before. You can drag-n-drop a color or a background pattern from the dialog to the icon view, and the directory background will be changed. Drag-n-dropping of emblems to files and folders works as well.
Same as with #856027, the following packages are needed: mate-desktop 1.16.2 mate-settings-daemon 1.16.2 caja 1.16.3 Since Caja 1.16.3 requires build and runtime deps on mate-desktop 1.16.2, the following change to debian/control is suggested: https://github.com/mate-desktop/debian-packages/commit/d4d940fdd2072a21de3803c4e0c560fc55e6d10c
