I also did a flood fill a while back while working on a “pixel drawing” sample (never finished or published :() ; it wasn’t too hard. As Rob said, Corona isn’t the best engine for this particular role, but it’s still possible.
Basically what you’ll want to do is populate the screen with rectangles (basically simulating pixels), the smaller the rectangle, the better the “granularity” of the picture, then just flood fill on the rectangles. You can find some algorithms that are pretty simple at Wikipedia: http://en.wikipedia.org/wiki/Flood_fill. You can also use vector lines (or polygons) to describe your shapes and fill them with rectangles if you want a crisper shape.
You can actually expand the “lots of rectangles” approach and go on to do pen hardness (color a circle of “pixels” progressively less based on distance from center), eraser hardness (same but with erasing), color selection (very similar to flood fill) and more.