I have been using Tux Paint for a few years and haven't made much use of it. I really didn't like how pictures were saved in the program and the lack of teacher options.
Then I went to a GREAT session at the MACUL conference in Grand Rapids, Michigan.
Wonderful lessons and templates for Lower Elem.
Jennifer Graber did a wonderful presentation on Tux Paint. She had several great templates and told us how to create templates and modify stamps. She explained how to set up the templates so they can used but not changed by the students. I just tried to download the templates a minute ago but her site is down. Tux Paint is FREE and works with Windows, Mac and Linux machines.
The official Tux's website. If you like freeware for kids, look at the links page.