Can't give any code, but I think you could do this:

Load a picImg(index) everytime you load a BMP
Load a picBlk(index) everytime you load a BMP

MAKE SURE picImg(..) and picBlk(..) have ScaleMode = 3

When you click on picBlk, (mousedown), set a Boolean (draw) to true, and bitblt (http://vbden.tripod.com/articles/invmask.htm) a the 5x5 area on the picImg that is where they clicked on picBlk. (centred at the mouse, get X and Y vals) In mousemove, if draw = true then you could do the same bitblt. On mouseup you could set draw to false.

This should achieve the desired effect.