I've been waiting for this one. Thought it would've come out a lot sooner.
It's called Sketches:
It's in Super Alpha. At the moment,
1) there's no save function (though it does remember what you did last time, even after powering off).
2) No partial erase. You erase the full screen by shaking the phone, like an Etch-A-Sketch.
3) Though it superimposes whatever you draw onto pictures from your camera roll, it doesn't work right.
However, it's the seed of a really good idea.