The ability to manipulate graphics and paint schemes in Forza Racing is actually quite powerful, making it a very effective way to look at how proposed paint schemes might look on your GTO. It's far more versatile than GT4 or NFS3, for example...and since you're already working with a 3D model it's far easier to use than PhotoShop.
It took me a bit to figure out how to manipulate the graphics, however.
You need to get into the Apply Graphics screen...in the first set of stock graphics, in the lower right-hand side, is a short vertical stripe with an corner taken off on one side. Select that, select your color, then manipulate it using the keypad. You'll need to toggle through the "Move", "Size", and "Spin" tabs using the accelerator & brake controls. Just start screwing with it...you'll get the hang of it. I just lengthened the stiock stripe past the car panels so that the cut corner part no longer showed. The "Stamp" button is handy as it allows you to clone a stripe or other graphic...
Pretty cool / cheap / dynamic way to simulate paint schemes!