I'd like to be able to show something like John Madden does when he's replaying a video and drawing on it. Is there any way to do this with Vegas 3.0? What other software would be needed to pull this off?
You can do this with a Wacom tab, Gary Kleiner is the king of this tool.
You can paint directly on vid with Ulead's videopaint. I don't know of a direct way you could do this in Vegas, there might be some strange workaround, but it really comes down to creating a mask to do it in Vegas. VideoPaint would be much easier.
With any graphic prgram-create template of solid transparent( i have handy 1024x768).The draw circle and save in png format. Open vegas. Insert video timeline and place your image above the clip where you want it. Pan/crop position your drawing and you done.