i use photoshop cs4,in french that's why i don't know  the names of all  the tools and others but i'm sure that the screenshots will help you to understand what i mean.

=)

title : "looking for the great great grandfather"

first scan your design in a res 300ppp (mine is done quickly with classic pencil) then open it with photoshop ,use the levels of black and push the left cursor to 140 (less or more  you see how it looks)

your paper looks really dirty now with littles points of every colors everywhere .select color replacement (use the +) and push the light cursor at the  maximum.select what you want in white .you picture is now only on black and white

select the background you want and paste your design on it

turn your design in soft grey(background and line)

first step to put the color with the color balance

use the color replacement to choose your colors easily

select the part you want add diferent colors wit hthe lasso tool

and one more

and one more

find something like this (sorry don't know how it 's called) select and after puting the color you need paste it on.

for the smoke i paste it on white points,and then erase  little parts to draw it and put some pencil touches.
pencil part is here about 4/5hours =)

from here it was only with 5 colors(without the background color) so we can select part of the design lasso tools (+)  and turn  in one more color

and one more ;)

and work it again with the photoshop pencil to add details and/or textures,you can also use the balance color  or others color effects.

and that's it!

thnx for apreciate and/or comment,if you have a minute support this design here http://www.threadless.com/submission/350332/looking_for_the_greatgreatgrandfather/showmore,designs