On my system here, I have an Intuos III installed with the latest driver downloaded from the Wacom site. I plugged in a Wacom Bamboo Fun tablet, loaded up Artrage, chose the paint brush and flipped the stylus over and the eraser worked correctly. Artrage hasn't been tested with multiple Wacom tablets plugged in at the same time with multiple drivers installed, but upon plugging the Intuos back in after I'd added the Bamboo, both tablets appeared to be functioning and eraser was supported in ArtRage.
So, my configuration was Windows XP Pro, latest updates. Wacom Intuos 3 and Wacom Bamboo Fun and only the Intuos 3 driver installed if that's any help in case you find you're still having problems ( you may be able to check your configuration vs mine and see if you can think of any differences ).
Initial install of the Intuos was done with the Intuos plugged in to the system, from the latest downloaded driver.
When you flip the pen over, it should erase but it won't change the active tool to the eraser.