When were the blues lines first applied to paper?  Who, or what body, first 
identified the need for lined paper.  Why blue?  Why not green or purple?  What 
was the name of the machine first used for this?

Shouse,

According to 

http://www.ku.edu/~bookhist/medbook1.html

"There were generally three major modes of ruling. The first, usually
associated with the early middle ages (though also commonly found in
humanistic manuscripts of the fifteenth century which unconsciously
adopted Carolingian practice in the belief that it was Roman) is the
use of a stilus which creates a furrow as it is pulled across the
surface."

This is the earliest mention of ruling that I have found, and would
date the process somewhere around 400AD.  The same source goes on to
mention how ruling advanced throughout the middle ages.

"The second method is to use lead plummet, an early form of pencil.
This usage is usually associated with the middle of the medieval
period. The most common method of ruling at the end of the Middle Ages
was the use of pen and ink."

For more modern innovations in ruled paper:

"According to Dard Hunter (Papermaking, The History and Technique of
an Ancient Craft), an English patent for a ruling machine was granted
in 1770 to John Tetlow. Before then, all paper was ruled by hand."

http://palimpsest.stanford.edu/byform/mailing-lists/bookarts/1996/04/msg00032.html

The source at ku.edu mentions that during the early Middle Ages the
common color for ink was black, due to the fact that the most reliable
known process for making ink produced ink of that color.  The first
mention of blue ink I can find is at

http://www.knaw.nl/ecpa/ink/html/ink.html

and explains why blue ink might have become popular.

"Iron gall ink is primarily made from tannin (most often extracted
from galls), vitriol (iron sulfate), gum, and water. Because iron gall
ink is indelible, it was the ink of choice for documentation from the
late Middle Ages to the middle of the twentieth century. Iron gall ink
was also easily made; the ingredients were inexpensive and readily
available. Good quality iron gall ink was also stable in light. It was
very popular with artists as a drawing ink, used with quill, reed pen
or brush. The coloring strength of iron gall ink was high and it had,
depending on its manufacture, a deep blue-black, velvety tone. The
range of objects that contain iron gall ink is enormous. Iron gall ink
is found on manuscripts, music scores, drawings, letters, maps, and
official documents such as wills, bookkeeping records, logs, real
estate transactions, etc. "


Regards,
Cindy


Other reference URLs:

The History of Printmaking
http://www.usink.com/history_printing.html.


Search terms used:

"ruling machine"
://www.google.com/search?hl=en&q=%22ruling+machine%22

rule OR ruled OR ruling "Papermaking, The History and Technique of an
Ancient Craft"
://www.google.com/search?q=rule+OR+ruled+OR+ruling+
22Papermaking,+The+History+and+Technique+of+an+Ancient+Craft%22

"John Tetlow" 1770
://www.google.com/search?hl=en&q=%22John+Tetlow%22+1770

I didn't find an answer (though I imagine it's because the blue lines tend 
not to reproduce), but I found these interesting tidbits:

George Washington did not have access to lined paper - he used a lined 
block set underneath the paper.

In Dard Hunter's book: Papermaking, The History and Technique of an 
Ancient Craft, he mentions that an English patent for a ruling machine 
was granted in 1770 to John Tetlow. Before then, all paper was ruled by 
hand.

And in answer to when blue-lined paper started, Jane Brown of the 
Waring Historical Library wrote:

"I know blue lined paper goes back before 1860.  The Waring Library has 
Theses of graduates of the Medical College of the State of South Carolina 
between 1825 and 1860 and a fair number of them are written on paper 
with blue lines."

And I found at least one instance of a yellow-lined journal in the early 20th 
century, so the prevalence of blue might be recent.

And the machine invoved is called a Ruling Machine:

http://palimpsest.stanford.edu/don/dt/dt2934.html

just to add to the information already provided, additional facts can be 
gathered at the websites listed below.  the genesis for lined paper had to do 
with transcribing of sheet music, as I understand it.  the blue/black colors 
have to do with ink dyes adhering to the paper.  the name that keeps popping up 
in my searches of lithography is Alois Senefelder, a Bavarian actor/playwrite.


http://www.airartnw.com/story.htm

http://www.geocities.com/Heartland/Acres/4818/history.html

http://www.execpc.com/~gwilli/tablestone1.html

http://www.naa.org/technews/tn971112/p6how.htm

hope this information is of some benefit.