Hi
I use versacraft ink pads which are FANTASTIC!!!
I've tried fabric paint but it's very messy, although good if you have a large area to fill. The versacraft ink pads are great for stamping names and/or small images. I just did a really cute baby gro (onsie) today so I'll post a pic on my blog a little later
http://www.michellemadethis.blogspot.com
I've also used those t-shirt transfer pages you can get to put through your printer. These are really good also but they do work out very expensive. My tip with these is to make the most of the entire page and don't waste an inch of it .... like I did when I first used it. Again they are good if you have a large area to colour although you then have to take into account the cost of your ink.
Good luck
Michelle