Drawing gets cleared on opening of context Menu in Windows7

To write an application that uses graphics as extensively as a program like Paint does, you need to understand how Wndows does graphics. Graphics using .Net can be much easier than if you use the Windows API directly, but if you are doing more than the basics of graphics then you need to know more than the basics.
 
Are you familiar with the Paint (WM_PAINT) message? It sounds like you are not. It is something that is done every time a wndow is changed in the manner you describe, and the results you are getting is likely caused by not handling the Paint message properly. Using .Net, you probably do not need to handle the Paint message directly, but you need to understand Windows graphics well enough to be able to ensure that the Paint message draws the graphics properly.