Greg --
It depends on how bad the canvas is, and what your expectations are. Are there any rips? Is the paint cracked? Has the filler chipped away? Is water leaking through the canvas? Is the current paint peeling off? A photo or two would help.
Painting over peeling paint is pointless – the old paint will continue peeling, taking the good paint with it. But if the old paint is basically sound, a fresh coat of paint can make a canoe look better, even if the new paint job is not perfect, and even if the old paint is a bit cracked.
Repainting canoes is done all the time, with all kinds of paints. Most use an oil based paint, and many use “marine” paints. Some use various other paints intended for exterior use – house paint, porch and deck paint, etc. Oil-based gloss paints are most commonly used. Water-based paints can work, as can semi-gloss paints. They are easier to apply, and may be easier to touch up in the future. I have used semi-gloss water based porch and deck paint (see my avatar) for a paint job that I expect to last for only a couple of years before I replace the canvas – the chief disadvantage I have found with it is that it is not so easy to keep clean, a particular problem with the light yellow color on my canoe. When I recanvas, I will use an oil-based gloss paint.
No paint job is any better than its foundation – surface preparation is critical. New paint will not keep old paint from flaking, so if you have flaking paint, it is important to remove it all, and then take steps to make the new paint stick. Sanding the flaking paint away may be sufficient, as long as what is under the old paint is compatible with the new paint to be applied. Spot putty may fill in very minor scratches and dings. In any case a light sanding is called for to help new paint adhere. After sanding, at a minimum I would thoroughly wash the surface (soap and water, or TSP) and rinse completely, and let the canoe dry completely before applying new paint. It may also pay to use a primer (Zinsser or Kilz) intended to isolate problematic bases from paint.
Take a look at these older threads:
http://forums.wcha.org/showthread.php?8564-Smoothing-Canvas&p=45937#post45937
and
http://forums.wcha.org/showthread.php?t=5790 especially pp. 2-3
and
http://forums.wcha.org/showthread.php?6607-sanding-or-not&p=35286#post35286
Hope this helps.
Greg