Heyo, running Drupal 5.5 here - installed the module w/ Lightbox2. The watermark works on the lightbox pop-up version whenever I click the thumbnail (whichever type of image that is), but doesn't work for any of the others. For instance, if you click the link below the thumbnail, which takes you directly to the image content page (rather than the lightbox pop-up). the versions appearing there do not have watermarks.

Feel free to email me if you'd like to check out what I'm talking about.