watermark/htaccess problem in live site

Hi there, hopefully I can explain my strange problem well.

I have WordPress 4.0 installed locally (wamp) and live via GoDaddy hosting.
I first created my entire site locally, and once it was to my liking (on laptop and desktop PC, yeah I’m OCD), I used Duplicator plugin to copy it to the live server.

Everything has been working the same, except this one watermark plugin – https://wordpress.org/plugins/alti-watermark/

What I noticed is this – when I have this plugin activated locally, the watermark shows up, nothing breaks, everything is perfect.
When I do this on my live version, every image in posts breaks. Upon deactivation the images work again.

When comparing local files and live files, I noticed on the local version, the plugin puts a htaccess file in the uploads folder (whereas in the live version it does not!). I’m guessing this is the problem on my live version.

The htaccess file that is put by the watermark plugin locally says all of this:

# BEGIN alti-watermark Plugin

<ifModule mod_rewrite.c>

RewriteEngine on
RewriteRule ^(?!.*\-([0-9]{3,5})(x)([0-9]{2,5})\.jpg(^\?([a-z0-9-_=&]+)){0,}$)(.+)(\.jpg)((\?[a-z0-9-_=\&]*)*)$ ../plugins/alti-watermark/watermark.php?imageRequested=$6$7&watermarkName=http://localhost/www/mywebsite/wp-content/plugins/alti-watermark-data/watermark.png

</ifModule>

# END alti-watermark Plugin. (generated on 2014-10-24 21:13.05 with php 5.5.12) [width=9999]

Is this a permissions issue? Something else?

On my live version, uploads folder has permission of 0775, and directories too within it. And the files have 644.

I tried to copy/paste the htaccess file into the uploads folder (with URL changed to live one) and it still breaks.

I tried other watermark plugins, but the reason I want to use this one is because the other ones I’m finding permanently place a watermark, which is what I don’t want. I can activate/deactivate this one w/o issues.

I’ve scoured the web for some info and the plugin support forum as well but I’m not finding any *concrete* answer. Or at least an idea of where to look. I’m really thinking it’s something funky with my permissions of htaccess or something because when I first duplicated the site to live, ALL my images were broken and I had to fix upload folder/image permissions and clear cache. Strange…first time I had that happen.

Sorry for the long post,

Thank you!