OK, this may help others that upgrade at some point...
The reason my site was not watermarking all the images for me was that I had performed a full server backup before I had upgraded my forums. After the upgrade, I put the files back by FTPing them from my computer...
Because I had done the backup to a DVD, all of my images has "READ" permissions.
When I went in with my FTP client and update the permissions to WRITE for each image the script was again able to watermark all my images.
I still have no idea why the script is replaceing the watermark value with "NULL" and I am not so sure about the advice above that the values once watermarked should say "yes" as even after this fix the watermark value in my database = "1"
But, my images are all watermarked and all those websites using my bandwith are at least now advertising for my site and that is what this was all about!