I think server-side would be best, the server should look for anything anamolous, log them, and ban or kick people based on how many times it was detected.
As for screenshots, it had better not send them online, it would kill diaup users. (Such as myself)
I think an external prog would be best approach, so people trying to test Paintball (such as map makers, like myself) wouldn't have to be inconvieniecved) and could turn it off. It would be easy enough to make servers test for this program...
You could make it closed source but free. Shogo, for example, has an Anti-Cheat client. Its optional, but you need it to play on public servers. But if you just want to test (Say, make a map) you can remove it.
I'm not really opposed to this. I just beleive that people should have the choice to have it or not, at the expense of being able to play on public servers. Because to me, anything else is an invasion of privacy.