Okay, so I create a paper wallet from blockchain.info and have it printed out with the public/private keys. Now I loaded it with some bitcoins. In my blockchain.info account it shows it as watch only.
Now my question is can I spend them partially or do I have to spend them in full by scanning the private key portion of the paper wallet?
The key to understanding what's going on here is to realize that there are not two, but three components of a bitcoin transaction that determine where coins end up. These are the inputs, the outputs, and the oft forgotten remainder. The inputs to a transaction are the addresses that have coins that are to be spent, and the outputs are the addresses where the coins are to be sent to. The reminder is the amount of coins left over when the inputs are greater than the outputs. In a bitcoin transaction, the remainder goes to the miner that confirms the block containing the transaction. That's why there needs to be a "change" address. If you have more coins in your input addresses than you want to send to the outputs, you need to send some back to yourself otherwise you'll loose them.
The standard bitcoin client handles this transparently by generating new change addresses when you complete a transaction. This is the "safe" thing to do because technically re-using an address can open you up to a kind of attack that would allow whatever coins remain to be stolen. This attack relies on being able to calculate a private key from a public key, however, so until quantum computers become a thing you don't really need to worry about it.
Though it is "less" safe, it is valid to use an input address also as an output address. I believe this is what blockchain does with a watch only address. Instead of creating a change address for the remainder in a transaction, it sends the change back to the original address. This means that you can use a watch only address multiple times without creating a new paper wallet. This means that you have to use blockchain when you are spending coins though. If you import your keys into bitcoin-qt and spend the coins, your paper wallet will no longer contain any coins. They will have been moved to a new change address.
EDIT:
I wanted to check and see if this is how blockchain actually works, and my guess is correct. If you spend coins from a cold storage address, blockchain will send the change back to the original address. You can see an example of this sort of transaction here.
You should be able to just make a transaction of any amount using My Wallet and it should just require you to enter/scan the private key to confirm/sign the transaction.
When Alice, who owns an address containing 5BTC, sends 4BTC to Bob: 1BTC is keep for her as change. But this 1BTC NEVER comes back to the orginal address: a new address is automatically generated, containing this 1BTC.
Qt-Bitcoin does that silently (and it's quite confusing I daresay) and create this address.
So, you can't send partially from a paper wallet. Or from any single address for that matter (since a paper "wallet" is in fact only a single address).
What you can do instead is "importing" the private key inside Qt-Bitcoin. and then spend the money inside that address. (and if it's partially spent, new addresses are automatically generated as already said)
