It doesn't seem to want to select different colors from the pallet whilst painting. I made sure they were selected on the configuration bar (on the 'ready' screen).
When you press F12 the second time, after capturing the drawing coordinates, it is asking you to capture the RUST palette. This means you are to draw the rectangle around the color palette on the right. Please refer to this demonstration video for more detail: https://youtu.be/8DdvCwKX0wQ