The paint should burn off, but if it is, or could be lead based, I'd avoid using the charcoal for cooking with. It'll be fine for forging blades though. Remember you'll only end up with about a third in volume of the original amount of wood.
You'll also need to make sure that the lid is completely airtight otherwise the wood will combust rather than char and you'll end up with a bin of ash instead.
It might be better to pack the bin with wood, place a sheet of plywood or similar on the top, invert the whole thing so it's upside down, slide the plywood out from underneath then light a big fire all round the outside of the bin. If you punch a small hole in the bottom of the bin (quarter inch will do) you'll be able to see what smoke escapes from the hole. White smoke means any moisture is being burned off which is good. When the smoke turns blue, all combustion has taken place and the outer fire should be allowed to go out. At this point whack a dollop of mud over the little hole to seal it off. Leave the whole thing overnight and in the morning scrape all the ash away from around the bin and lift it off. You should be left with a pile of charcoal.
If you can be sure of a tight fitting lid, try doing it upright by all means but if the lid fits over the outside of the bin then a airtight seal probably won't be possible. If the lid fits on the inner rim you can seal the edge with sand or mud making it airtight.
If doing it inverted, pack some mud round the base of the bin before you light the fire. The bottom needs to be sealed as well.
Hope this helps,
Eric