I would definately recommend painting. You can start with water colors since they are a bit more forgiving in the mess department, but definately get some washable paints, (Walmart and Target have Crayola ones for cheap), and let them go at it. My little one really likes painting the little figurines, which are also cheap. I just lay down an old shower curtain in the kitchen and she paints on that.
The day I finally broke down and bought a rotary cutter, my husbands first words were, "You're going to hurt yourself with that." Sure enough, the first time I used it I cut my finger open! The thing is, I wasnt even using it! I had set it down and just hit my finger on the blade and it still cut me wide open! Sharp little booger. But it sure taught me to retract the blade when not in use!