Pariah Devalis, on 08 December 2011 - 06:37 PM, said:
Check to make sure you're not painting on the blending layer itself.
lahyenne, on 08 December 2011 - 05:12 PM, said:
That was it. Now I feel *proper* stupid.
Edit: The only thing I can't seem to get right is the merging layers when you add a 'decal'. When I hit Merge Down there is no Preserve option and it ends up looking like... well this:

Yeah, this isn't right. Are you merging down just the logo and not all the layers?
Another option is to set your logo to multiply and select the area it covers. Move down to your paint layer and delete the paint there to make it perfectly transparent.