Here is an example of bamboo, finished with clear poly before engraving. Color fill in these small areas is done with a thing called a "brush-pik", which looks like a tiny Q-tip, available in hobby shops for model painting. Blending is done by outlining dark colors first, then adding lighter colors like yellow or white in the center areas. Using a clean brush-pik, you softly blend them together. These items are about 1 1/2" x 1/2".
edit: I forgot to mention that I wipe the excess paint off using De-Solve-it, a waterless solvent which removes the oil based paint I use very easily. Goo-Gone would work as well.