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You need to post a link to your site and decide what watermark your trying to do. You only set those permissions in edit cats if your doing permanent watermarking
In on the fly all you need to do is this
Enable on-the-fly image protection
set to YES
When using on-the-fly image generation, do you want to overlay the watermark image?
set to YES
Turn off watermark in watermark options but of course you want the full server path to the watermark wherre asked
Thats all you need to do for on the fly watermarking but the watermark needs to be a png image since gd2 is used for on the fly watermarking
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