Paper towels make a great substitute for painting sponges. To use them, fold them into squares and then wet them so they are damp. Have the children dip the damp, folded-up paper towel into the paint and then use the paper towel like a stamp to pat paint onto their paper. They can also drag the paper towel across whatever they are painting and, thus, use the paper towel like a paint brush.
Instead of using plain white paper, try supplying kids with paper towels to paint on with watercolors. One thing that they'll notice is that as they touch the paint to the paper towel, the color will spread out, almost like the color is blooming. If you would like to turn the art project into a science project, give the children magnifying glasses so they can watch up close how the paint travels along the fibers of the paper.
In this project, kids use paper towels to make a snowman sculpture. Give each child six paper towels then have each child crumple up the paper towels to make the snowman's parts. Have the children use three sheets for the bottom, two for the middle and one for the head. After they have done this, have them soak three more paper towels in a water-and-glue solution and wrap the soaked paper towels around the crumpled ones. Once they have done this, have them build the snowman and leave their sculptures in a warm, dry place for several days. Once the snowman is dry, the children can paint it.
Paper towel tubes can be used for a variety of purposes. Children can tape or glue two of them to make binoculars, or place wax paper over one end with a rubber band to make a kazoo. They can also fill them with rice or beans and tape over both ends to make a musical shaker, or you can give them a pile of paper towel tubes and let them use their imagination to build whatever they can think of.