Converting to CMYK or painting directly in CMYK would have the same effect: The range of colours available in CMYK is smaller so you can't get a full range of blends. When you convert, the application (Photoshop in this case) converts any non CMYK legal colours in your image. If you painted in CMYK you'd get the same limited palette. This is why ArtRage works in RGB, we try to avoid reducing your colour palette as much as possible.
We don't do internal CMYK conversion because of the associated complexities of that type of system - Including it would require us to provide a wide range of print style services that the application isn't suited to. In your case, Photoshop is probably your best bet for reducing the image to CMYK if you need to.
Hope that explains it!