The paddleboat is found on play 2 act 3. By "don't scratch the paint" it means you can not take any damage. You will have to jump over some mines and other small boats. You will also have to navigate between some mines along a narrow path. Navigating through the mines are not to difficult but be careful when jumping over the other set of mines. Make sure not to jump until your boat's front is very close to the mine in front of you. Other wise you may not reach the required length to jump the mine and land the back of your ship on the tip of the mine.