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I dont know what to say. Try editing the file and posting a link here of a photo and let me see.
If you look at the code your replacing and what your replacing it with you can clearly see there should be no issue. Your only replacing a few lines of code with a bunch of conditionals that change the logo position based on your admin setting. This is the same exact code in our Reviewpost and Classifieds programs and the same exact code exists in your image-inc.php file in Photopost to position watermarks using the permanent watermark feature.
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