Yes, the Vcc input of the decoder would be connected to the PWM output of the Arduino.
Then the four channels A, B, C, D of the decoder input could be set high (in whatever desired binary form) using digital outs from Arduino to select any combination of the a, b, c, d, e, f, g channel outputs of the decoder, which would in turn be PWM'd based on the Vcc input.
The RGB LED's would be hooked up so that a = Red1, b = Green1, c = Blue1, d = Red2, e = Green2, f = Blue2....and g could be an extra channel for a plain color LED....maybe white