Tim, products don't have to use every option that an attribute has. There's a link to the attribute administration section from the options tab that will let you add the "Fluffy Muffin" option quickly. Then you can add it to the product you were just on, and none of your other products with the color attribute will list "Fluffy Muffin". Unless you go change them, of course.

cYu made a contribution that dynamically updates the price when you select an option, too.