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Hi..
To solve the watermark issue i would recheck all your categories > Admin > Edit Categories >
look for the setting near the bottom of the screen :
"These checked usergroups will have their photos stamped with your overlay photo"
and alter normal/registered users uploads not to have a watermark for each category, same again for administrators but this time set to 'yes' (have watermarks) - do this for each category you have.
To view subcats without thumbs you would need to turn off "Show Most Popular images on Index page?" in the index options.
-T
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