Click on the headline to go to a website with a free Photoshop blender brush. Save it here:
Program Files\Adobe\Adobe Photoshop CS3\Presets\Brushes
Then, in Photoshop click on your Smudge tool and then select the last brush in the brush palette... when you use this brush for your Smudge tool it blends the colors you pass it over rather that just pushing the colors around. I haven't had much time to play with it, but it's pretty nifty.