This one is complicated. Shiva is indeed Hebrew for Seven, and the Shiva is indeed the week spent mourning a dead one, usually sitting down. And indeed 'seven shades of shiva' is a phrase that is in use, though it's not common. See for example:
http://www.psyreviews.com/comedy/trancebook.html
But I suggest these are red herrings - typical Vonnish word play, but not much else.
But I suggest we stay with Hinduism for this one. Shiva is an important deity, a primary incarnation of Vishnu. Shiva's history is of course retold in the famous Bhagavad Gita. And here we get back, I'm afraid, to bombs - that old Von favourite. The orange haze is of course a reference to Agent Orange (not napalm), as used in Vietnam, Iraq and so on. But once again Von is flirting with the imagery of the big one - the a-bomb, destroyer of worlds...
On July 16, 1945, near Alamagordo, New Mexico, the pioneering nuclear physicist Robert Oppenheimer witnessed the first explosion of an atomic bomb. His feeling was one of awe, and the sense that humans had now usurped the place of gods. Being well-read, he quoted the Hindu epic about Shiva and his pals:
If the radiance of a thousand suns
were to burst into the sky at once,
that would mirror the Mighty One's splendor....
I am become Death -- destroyer of worlds.
--The Bhagavad Gita
So, as Oppenheimer said on watching the bomb blow, I am become death, I am become death, I am become, I am come...
The song is about war, and about drugs, of course, but as a possible sequel to Vision Thing, it reprises those themes on many different levels - the real war on drugs in Colombia and now Afghanistan, the connections between the loafer buying dope and incense in Leeds and the war going on where those are produced, the drug-addled American troops dropping bombs around the world, and my God how could you drop an a-bomb unless you were? All of these things, I guess. Great song.