There is an Android app PicSay that works perfectly well on the edge that allows you to draw on your pictures, but that's on the tablet not e-ink side.

If solving crosswords and puzzles is really what you want, there is an awesome website that has hundreds you can download as pdfs. (there's another puzzle thread on here - just search for puzzle). It works awesomely.

I haven't tried opening a jpeg on the e-reader side. If I get a chance to do so today, I'll post back. Just wanted to mention my favourite puzzle site and how well the edge works for solving puzzles in pdf form.