Indiscriminant painting of the speed sender paddlewheel can indeed "pin it" keeping it from revolving and the sending unit from sending data. The wheel blades should be painted using a very small brush and care taken to not let paint get to the center hub & axle pin or have a buildup on one blade to unbalance the wheel, then when dry spin the wheel to ensure it spins freely and smoothly. Your speed sender may have an insert you can remove while the boat is in the water if the supplied blank plug insert is stored correctly right next to the sender . Once removed you can dismantle the paddlewheel & axle pin for cleaning or replacement if it is damaged. Or if the boat is hauled you can use compressed air to spin the wheel while someone checks the energized main speed display.
Replacements (the whole insert core or just the 4 or 6 blade paddlewheel & pin kit) may be obtained from DMI Marine and possibly from Sea-DMI. Both picked up the pieces after the original Datamarine that made your speed & depth instruments went kaput long ago, and they both have websites. Coincidentally, I just received my order for a couple P-6 paddlewheel kits from Kelsa & Steve(?) at DMI Marine a few days ago & bought a replacement speed insert core from them a year ago (I don't know them- voices on the phone.) They apparently have in-house service for at least some Datamarine models as well and may offer add'l troubleshooting tips if called.
Water-based transducer paint is recommended for transducers to prevent damage from the solvents in many common anti-fouling paints.
Before doing anything else, make sure the cable & display unit connectors are bright & corrosion free and remove/install them a few times to see if that improves results. Also make sure nothing(fenders?) stored in the bilge in the vicinity of the T/D & speed sender is pressing against the cable where it exits those devices.
