It needs to be freeware, or at least start out as freeware with reasonable functionality, I don't mind a paid upgrade path. I've looked at Sumopaint, Pixlr, PicMonkey and Befunky, and am probably keenest on Sumopaint. No, Pixlr. No, Sumopaint.
I'm planning to take a look also at paint.net, Photopos, and Photoplus, but all of those have to be installed locally, which may cause my beginners some agony, and are also windows-only, whereas the web-based tools are more cross-platformy.
They all have their downsides! Any recommendations, thoughts, ideas? What functions do you think would be most useful/entertaining/fun for a mixed bunch of people, most of them old enough to have had no computer skills training?