The way you should do this is as follows:
- Go to the photo in the manage photo section of the edit album screen.
- Click on the thumbnail image, this will open a new tab with the fullsize image
- View how it is now.
- Leave the tab open, but go to the previous tab.
- Apply the watermark
- Go to the full image tab, it still shows the original image
- Press CTRL+F5, and view the modified image
Reloading the page re-uses the already downloaded images (from the temp internet files). Refreshing the page, i.e. really re-downloading the data happens in most browsers by pressing CTRL+F5. If this also fails, cleanup the temp internet files.
When you go to the frontend to see the final result, you will most likely also still see the old image (from the browser cache/temp files).
Also press CTRL+F5 will most likely help.
When manipulating data on the server this way (also rotating images etc.) you should make pressing CTRL+F5 a 'second nature'.
If you want to make a watermark (incidently) intenser, simply apply the same watermark again. Try it, using the method i described above.