If you're doing smallish buttons, you'll need to zoom in a lot and paint one pixel after another (ie, click, click, click, click... instead of 'drawing' per se).
Googling for 'icons' and 'pixel art' might get you some good tips. And having a look at current WPSes by other artists should help you figure out what's the deal with the pink thing (transparency).
The GIMP is indeed free (in both senses of the word).