How faded is 'too faded'? Aren't pretty much any colors of denim okay to wear?
If you want to dye them, RIT dye would probably have a 'denim' color (do a web search for "dying jeans" or something similar).
The problem I see is that the newly-dyed shorts might end up too uniform in color, and not really look like denim (even if you get a 'denim'-color dye). If you want them to look more like denim, and not just 'blue shorts,'you could rub them with a pumice stone (the same kind people use to smooth their feet). This will cause some wear, however, so depending on how old the shorts are, might not be a good idea.
HTH!