We were solid enough and aggressive which was good, and we did the basics well without really getting our passing game going.Richard Beale
The Blues striker struck his opener on the half-hour mark, before finding the net twice more after the break.
Olly McCoy completed the scoring for the hosts on 75 minutes, before Colchester hit back with two goals in the last 10 minutes of the game.
Blues also hit the woodwork on no less than three occasions.
Senior Professional Development Coach Richard Beale felt his side were worthy winners, although he was a touch disappointed with the way they conceded twice late on.
"Whenever you score four goals you've got to be happy,” said Beale.
"We were largely on the front foot but we didn't play as well as we can.
"We were solid enough and aggressive which was good, and we did the basics well without really getting our passing game going.
"Overall I was pleased with the endeavour, but disappointed with the last 10 minutes where we were a little bit slack and let them in with two goals, when all we wanted to do really was keep a clean sheet.
"Kyle took his chances well. He's got lots of pace and he can finish, so I was really pleased for him.”
McFarlane - last season's Under-23s top-scorer - has now registered four goals in three league games. The Development Squad remain unbeaten, with two wins and a draw from their opening PDL matches.
Blues Under-23s: Jake Weaver, Josh Dacres-Cogley, Ryan Burke, Josh Martin (Olly McCoy, 65), Dan Scarr, Geraldo Bajrami (Ben Forrest, 75), Odin Bailey, Cameron McGilp, Kyle McFarlane (Tom Anderson, 75), Beryly Lubala, Steve Seddon.
Subs (not used): Michael Luyambala, Ryan Stirk.
Goals McFarlane (30, 60, 65), McCoy (75).