There are various ways of using colour for painting.
1. Confectioners Glaze and powder colour. This is the best but you will have to buy a brush cleaner as this does not wash off with water, is expensive and when you have left overs it is not easy to store to use again as it goes hard. Dries exceptionally fast.
2. Gel Colours. Use these with a little boiled water to make it easier to paint. The only problem with this method is the colour can be pale and you will have to build up the colour in layers. Let one layer dry and then paint again. You can store these colours and just add a little more water if needed. Brushes also are easy to clean.
3. Powder Colours. Use these with clear alcohol, Vodka preferably. This has a similar effect to the confectioners glaze as it dries fairly quickly. This is the most common used and it gives the best results. Brushes can be cleaned with water and when the alcohol disperses into the air you are left with the powder residue that can be reused. And no after taste.
You can use the powdered colours with water, but the structure of water does not allow for a good mix and you can have some disappointing work.
With all the colours, make up a very little at a time. Use a paint mixing tray and a dropper for the liquid. You will only need a couple of drops of liquid at a time. A little goes a long way. Do not overload your brushes and use a size to allow for ease of painting the area. Fondant does not have to be totally dry before you paint. I have on more than one occassion painted directly onto the fondant.
As for the peppermint essence, once the liquid has gone you will be left with a really strong flavour of peppermint and this could taint your work. You could be leaving enough flavour on one painted cookie of peppermint that you would normally need to flavour a whole batch. Best is to practise with what you have and adjust to what you feel comfortable with. Dont forget too much water in one go will eat away your fondant. Hope this helps you.