It is currently not possible to paint at range, eg wool:pink on top of wool:white

Release 0.3 has the temp fix
http://dev.bukkit.org/server-mods/toolbelt/files/6-tool-belt_0-3/

I'm going to close this issue and open a unified bug on finding a proper way to notify all users in an area of a block change. Please comment if you feel like there is a better way to handle this.

Ah, this is another recurrence of an issue I have come across before. The block is actually placed, you game client just isn't told about it. To prove I am (or am not) on the right track, try painting the block at range, see no update, and the log off the server and log back on. You should see the block has actually changed.

I know of one fix currently, which will update the paintbrush user, but it will still look unchanged to other users in the area. I have researched a proper fix without success, but do have a couple of more ideas. In the mean time I do know of one partial fix which I will implement in the next version.

The temp fix involves sending a sendBlockChange() event to the user:
subject.sendBlockChange(location,type,data)