Should you use "I thought it was" or "I thought it is" when talking about an eternal fact?

A slightly simpler example.

I used to think the sky is green --> At some point in the past, I believed that the statement "the sky is green" is true, but I no longer believe that. Now I believe that the sky is not green.

I used to think the sky was green. --> At some point in the past, I believed that the statement "the sky was green at some point in time but is no longer green" was true, but I no longer believe that. Now I don't believe the sky was ever green.

As you can see, both statements are grammatical, but their meanings depend on what the author is trying to say. So, the answer to your question concerning whether you should use red was called orange or red is called orange depends on what you're trying to say, on exactly what it was you used to think.

The confusion is caused by

1) The English subjunctive mood (used for conditions contrary to fact*) is very often identical with the simple past tense.

2) English speakers use the subjunctive less frequently than do speakers of most other languages so we're less comfortable forming and decoding it.

"I thought the sky was green" --> "was" is in subjunctive mood, i.e. condition contrary to fact.

Similarly,

"I always treat you as if you were a nice guy!" means that the equation between the listener and nice guy was contrary to fact. ("As if" often introduces a clause in the subjunctive)