So one of the characters in my group is playing a social adept with the primary focus of impersonation. What type of bonus would melanin control give.

The players main question is regarding going beyond natural skin, and hair color(especially hair color) and why it isn't allowed.

I'd appreciate opinions on how to handle this power, especially examples anyone might have from in game.

Generally, you're looking at the Social Modifiers Table, p.131 SR4A, and it depends in a large part on the prejudices of the people the adept is dealing with.

Natural skin and hair color varies widely, so much so that with the right combination you can achieve effects that look unnatural (dark brown skin and bright red hair, for example), but you can't have colors that don't naturally occur among humans (no cethereal or green skin, or blue or purple hair).

But an elvisch adept should have a wider range of colors due to their near endless color-variations?

I don't recall elves having "near endless color variations"...
As for the "melanin control" power it does what the name implies: control the melanin in your body. The melanin is the compound that's responsible for the hair and body natural color. So there's no way the adept can use this to get unnatural colors.

You can get unnatural colors for hair or body by other means, which can be found in Augmentation.

No, the power's pretty specific about that. You could use it to disguise your (natural) unnatural coloration, like a Night One with blue fur that changes it to black or red or blond, but not specifically assume unusual colors outside of the human norm.