Canvas goes on the outside, held in place by the water pressure. Old sailor's trick is to use sails to plug holes in the hull by pulling them across the outside of the hull with a line strung underneath the hull.

Even if the Titanic had a peice of canvas big enough, it would be almost impossible to position over the 200+ foot long split rivet seam that is supposed to be the cause of her death.

Titanic was launched on 31 May 1911, sank on 15 April 1912, so she was in the water for nearly a year before her maiden voyage. Bottom paint has been around since ancient times - an Englishman received the first patent in 1625 for a mixture of iron, copper and cement. Titanic had a copper-based anti-fouling paint applied before her launch.

Even if there was little organic growth on the outside of the ship, it was hardly smooth. This was a riveted ship (over 3,000,000 used) and the hull plating overlapped to facilitate that. You can see it here