Ok. Here is a good
free paint program. Much like photoshop and with tutorials and at least one book commercially available...
http://www.gimp.org/Secondly, you create terrain from a bitmap in MED, not WED. When you have created your bitmap, open MED and click "File" at the top left of the window. Click "Import" from the menu that appears. A menu will open to the side of the current one. Select "Import terrain from pic". A load dialog box will open where you can browse to and select your grayscale bitmap.
Here's one I just did...
Then open MED and follow the above procedure. After opening it, I went into the texture manager and changed it around to be a little more presentable for this particular post. Here is the result...
Texture it as you would like and save it as a model. Not that hard, is it?