I found this old thread:
http://www.quiltingboard.com/main-f1...s-t113864.html
I did this many years ago (over 15!) with children in my daughter's class at elementary school. As I recall, I used fabric paint purchased at Michael's or Dick Blick's. I poured the paint into paper plates for the children. Helped them press a hand into the plate, then helped them place the hand on a prepared fabric square and pressed down on the hand to make a good imprint.
Found this link to what I think is the type of paint I used:
http://www.dickblick.com/products/cr...kTracking=true