Yeah, those tools only seem to edit the background but not draw on the canvas. I think this is because the program was built using Decker. I'm not a programmer or game dev by any means so take what I say with a grain of salt, but from my understanding:
The tools you draw with on the canvas (tool bar on the right) are widgets that have been programmed to draw certain things on the canvas
Meanwhile the toolbar on the left are actual tools you use to build the program (Wigglypaint) itself. On Decker, you can use those tools to build your own program! (I recommend taking a look at the examples of games/applications people have made on the Decker website)
So unfortunately, the tools on the right can't be used to draw on the canvas, unless you decide to code your own circle/square tool widget with them.
Hope this helps!