EDIT: ADDED A SELF EXTRACTING ZIP FILE FOR THOSE WITHOUT WINZIP - AND (hopefully) FIXED THE .CCGAME FILE
well its here, PaintZ beta!
RANT
everything is in it that i wanted to do (
Except UNDO / REDO which im not sure is possible due to memory restrictions - ill have to spend a while on it so maybe in a newer version 
)
Everything else seems to be working a treat - hope you guys like it - its been a lot more work then expected lol : p
IMAGES
Please take into account im NOT an artist at all
CONTROLS
Use the back button to open the main menu (while drawing)
D-Pad to select a menu item, Middle button to select
back button cancels menus
Play/Pause opens the tool pallete
D-Pad to move the mouse, middle button to select tool/color etc
ummm Middle button to use the current tool, D-Pad OR Touch to move the paint cursor - touch can be turned on and off in the tool select.
D-Pad to move cursor on the on screen keyboard - middle button to select a letter
DOWNLOAD
I think thats about it!!! let me kno wat u think (Runs on XNA 3 Final)
Download Source
PaintZ Self Extracting EXE
.ccgame file