Can you thin gel food colors to paint on the cake? or would pearl dust or luster dust mixed with clar extract work better?

You can thin gel colors to paint on fondant. Pearl dust or luster dust will give a different finish because they're usually sparkly.

thanks.....could i just thin it with a clear extract just like i would for the dusts?

I just use plain water with the gells. I use either vodka or clear extracts for lusterdust. And yes, people look at me strangely about the vodka...non "cake" people I mean <G>