Yes Krishna was actually a deep, dark blue. The Shastras describe His skin color as like the dark blue sky of evening, not quite yet night, or like monsoon clouds, or a deep sapphire, or like the blue lotus flower.
Arjuna always knew he was divine. It was common public knowledge that Krishna was at least some kind of divine being. Keep in mind, Arjuna had met many Devas before. He had spent time as a guest in the court of his father Indra, had dueled with Shiva, had met Agni and Varuna and many others. It’s not at all as though Arjuna was unaware of Divine beings, or that Krishna was one. But he did not understand the full nature of Krishna.