Wheeehaa, I just CONFIRMED the RedB4Green Challenge!
You can get your wizards diploma with the green magic level after you already got the red magic level, and still finish the game! I've attached the savegame to prove it.
It shows you on franco's island at the key fragment's location. You can see in the inventory here that I have the green ring of lightning, but also sendell's ball (green level overwrote red). If you activate the pickaxe, you immediately jump to fire level and from there you can continue the game as normal (only from this point you can see I had red before green, after you get the keyfragment you won't be able to see that anymore)
BTW, I class this challenge as medium difficulty and long.