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CloudCanvas is an HTML-5 based image editing tool that sports some interesting features. You can work with vector and bitmap images, import files in JPG, GIF, and PNG from both online and offline sources, and save in PNG and SVG formats. CloudCanvas integrates with Google Docs so all your files can be saved securely there and imports images from the Open Clip Art Library, Google Images, and Deviant Art.

This is a useful drawing site with a good set of tools to allow your students to be creative. You can upload images on to the canvas http://ictmagic.wikispaces.com/Art%2C+Craft+%26+Design

Allows for digital paint, some brush types, lots of editing, includes layers, an advanced tool for painting, might be too much for little ones. No login required allows the student to download work.