There are a couple of ways you can blend in ArtRage.
Aside from the palette knife, you can also set the loading on the oil-brush to 0%.
Also, if you take a marker pen and turn the wetness up to 100%, make sure 'Art Pen' is off, and choose the colour white, it just paints with water, mixing with any colours that are already down there.
If you turn 'ArtPen' on, and <alt>click one of the areas you want to blend, you can blend that colour into another. Every so often <alt>click an unblended area to choose that colour to blend with.
AndyRage's mantra for graphics engine code:
"Sure - how hard can it be?"