discovered in http://drupal.org/node/212187

line 210:

drupal_set_message('Function $function does not exist. Watermarking cannot be done. Please make sure that you are running PHP 4.3 or higher, or that you (or your hosting provider) manually compile the GD library into your PHP installation. You also need PHP to be compiled with --enable-exif.', 'error');

wrong quotes, replace single quote ' with "
otherwise $function is displayed instead of the functions name