The rebuild thumbnails link is useful when your thumbnails were created previously at a different size than what you currently want to use.
When you rebuild a thumbnail, it uses the current full-sized image to build the thumbnail from. Unlike other gallery scripts that keep an untouched copy of the original, Exhibit only keeps one full-sized and one thumbnail image. (For better or worse.) If you apply a watermark to the full-sized images, and then you rebuild the thumbnails, well... You get watermarked thumbnails.
My advice is not to rebuild the thumbnails unless you really need to, or don't use the watermark feature. I figure that you'll be rebuilding thumbnails so infrequently that it won't be an issue, but what do I know? :)
Regarding the Exhibit edit areas: That's a toughie. Both of these boxes us inline styles. (Yeah, yeah, bad Owen...) Look in exhibit10i.php. Line 361 is the current images div, called 'ex_image_scroll'. You'll see the width parameter there, and you can change it.
The div that contains the file picker is just below that on line 407. It has no ID. You'll see a similar style setting on that tag.
What's with the difficult questions today, guys? :)
Daunted yet? No? Good. When you're done, I'll see about incorporating your changes. :)
Of course, you could always use the setting that downsamples your original image when you upload it, so that it's only ever so big when Exhibit displays it. Save yourself the server space, the download time, and the mild annoyance of scrolling.
Is there a big demand for keeping the originals for a "third tier" of images? I'm not making any promises at this point, but I'm curious what you all think.