This is an interesting question. It seems highly unusual for a painter to work directly on the surface of a wall. It seems very impractical--unless the artist were doing a fresco. It also seems unusual that the client, the Duke, would want a portrait of his wife painted on a wall rather than on a canvas. The Duke tells his visitor that "Fra Pandolf's hands / Worked busily a day, and there she stands." Could the artist have finished such a portrait in only one day? Normally one would think that such an important work would take weeks.
Evidently this is a full-length portrait, because the Duke says, "...and there she stands." This would require even more time and work than a typical portrait, which only includes the head and bust of the subject. The Duchess would have been wearing a beautiful gown, possibly trimmed with lace. How could any artist execute such a painting in one day? Just mixing the paints in those days would have taken hours--and the light would have kept changing all the time. It would have been an excruciating experience for the subject as well. The Duchess would have had to stand in one position for many hours. Later he repeats, "There she stands."
It may be that the Duke is not expressing himself well. He may mean that the painting is hanging on the wall, and he may not mean that she is shown standing but something like "...and there she is" or "...and there it hangs." He could hardly say "...and there she hangs" even though he had her killed. After all, the Duke could not say, "That's my last Duchess on the wall." He has to mention, for the reader's sake, that it is a painting, whether on the wall or on a canvas hanging on the wall." As a matter of fact, if he is speaking to a visitor and they are both looking at the painting, why should the Duke say "...on the wall"? Or if it is actually painted on the wall, why should he say "...painted on the wall" when that would be obvious?
A possible explanation is that the Duke is ignorant about art and is expressing himself carelessly and badly. He may be completely wrong in saying that Fra Pandolf completed the painting in one day. The Duke probably wasn't present and may have even been away from the estate in Ferrara.