For the Texture Paint mode, you need to have an UV map.
If you never did an UV map, while it’s not as good as a manually built one, you can get an automatic one with the Smart Unwrap function.
It works exactly the same in both 2.49b and 2.57b
-First select your model
-Go to Edit Mode, put your mouse cursor somewhere on that line
And right click
Select the option “Split Area” and put the separation line around the middle of the screen then click.
The 2nd window to the left have the panel developped, hiding lot of view, put your mouse cursor there and press the keyboard " T " to close it.
Now click on this :
And select “UV Image Editor”
Click on “Image” then on “New” to create a new texture.
Now go to the 1st window and select your model entirely.
Press U (or Mesh -> Unwrap) and select Smart UV Project , it will create an automatic UV.
Now go to Texture Paint Mode, it will work, and you’ll see the painting projected on your UV Map.
(Note, to rejoin the 2 window in a single one, just put the cursor of your mouse on the line separating both windows , right click and click “Join Areas”)