Artiz@ Realy cool
Photoshop does have somithing similar 'bleed' , you just have to set up one option ( i don't remember what is it called ^^' ). Or if i'm wrong there might be a plugin.
Caspis Sinclair @ i haven't used blur/smugde. I think it's rathe matter of choosing right brushes.
edit@Artiz@ sorry forgoth answer your question - This is a action adventer game i'm working on since 2004.