In order to get the picolisp-mode working correctly you have to add the following expressions to your .emacs and adapt them according to your set-up:
(add-to-list 'load-path "<path-to>/picoLisp/lib/el")
(require 'picolisp) ;; Picolisp TransientSymbolsMarkup is automatically loaded
If you have also SLIME installed, it will suck all possible lisp extensions up (greedy bastard). So in order to get the correct file-association for picolisp files you'll have to also add this:
(add-to-list 'auto-mode-alist '("\\.l$" . picolisp-mode))
If you want, you can add a few hooks for convenience:
(add-hook 'picolisp-mode-hook
(lambda ()
(paredit-mode +1) ;; Loads paredit mode automatically
(tsm-mode) ;; Enables TSM
(define-key picolisp-mode-map (kbd "RET") 'newline-and-indent)
(define-key picolisp-mode-map (kbd "C-h") 'paredit-backward-delete)))
By the way, don't forget to patch your paredit.el (v21) with the patch provided to get a smoother editing.