I'm not sure about the server settings you have. This should work in most environments, but after spending days trying to figure it out myself, I found a fix which just made NextGen worth every penny!
For anyone else having a problem with the .png watermark not displaying or showing on your NextGen Gallery images (even though it's showing on the thumbnail during option setup), here's a fix I found. Having explored dozens of other possibilities, I'm betting this solves the problem for most of you.
When designating your watermark, use an absolute path. Most of us have assumed it meant something like this example:
http://www.mydomain.com/images/watermark.png - But this will not work.
You need an absolute path that looks more like this example:
So how do you determine your "absolute path"?
In Mac, create a new text file. Make sure it's PLAIN TEXT, not RICH TEXT. You can choose that option in the format dropdown. For Windows, launch Notepad. What we're trying to do here is use a PLAIN TEXT editor. We want to avoid using Word. That's a discussion for later.
After you created a new plain text file, place this code in it:
$path = getcwd();
echo "Your Absolute Path is: ";
Save the file as "abspath.php" in the same folder as the watermark image.
Now with your FTP program, upload the file. Again - upload this file to the same folder holding your watermark image!
Visit the URL to this file in your web browser:
You will see this page display the REAL absolute path you're looking for.
Copy that convoluted looking absolute path into your Worpress/NextGen watermark options and paste that as the path FOLLOWED by:
So, it will ultimately look something like this:
Forgive me for being "wordy", but I know there are many who aren't programmers and I think a little more info sometimes helps.