I want to write a paint program in the style of MS Paint.
For painting things on screen when the user moves the mouse, I have to wait for mouse move events and draw
Interpolating mouse movements with line segments is fine, GIMP does it that way, too, as the following screenshot from a very fast mouse movement shows:

So, smoothness comes from a high frequency of mouse move events. WxWidgets can do that, as the example code for a related question demonstrates.
The problem is in your code, Heinrich. Namely, drawing into a large bitmap first and then copying the whole bitmap to the screen is not cheap! To estimate how efficient you need to be, compare your problem to video games: a smooth rate of 30 mouse move events per second correspond to 30fps. Copying a double buffer is no problem for modern machines, but WxHaskell is likely not optimized for video games, so it's not surprising that you experience some jitter.
The solution is to draw only as much as necessary, i.e. just the lines, directly on the screen, for example as shown in the link above.