That's what I thought and after I made several entries employing that principle – changing SKU along with size and/or color – it seems to have worked.
Now what would be really trick would be to treat the SKU field as we do the options we create so we could enter all the variables for shirt x including the different SKU's and than select them from the "manage options" window. The only caveat would be that the SKU should not display to the customer. Probably wouldn't be a bad idea to allow the choice of not displaying any option.
That would be a lot less work than what I'm now doing – enter all the options than the data about a product and "save" than "update" and change the SKU and choose the predefined size and/or color and "save" again, than do it all over again for the next iteration of the same product. So 5 sizes available in 2 colors each available with one of 2 different color designs means, if my math is correct, 40 trips through the process I've just described.
If SKU were an "option" a whole lotta steps could be saved.
The way I'm doing it now all iterations of the same product show up as a single item with size and color variables and thus enables tracking inventory by SKU.
Alternatively, you could use one overarching SKU and create a "part#" option or somesuch but that again would have to be not displayed to the customer.
If I'm right about all that I've said than I don't think I'm the only one who was unaware of the full potential available and this ought to be made more clear to everyone.