Text watermark is working but image watermark is not.

What steps will reproduce the problem?
1. Set png image for watermark.  Unlike for text, nothing showing in preview.
2. Go to gallery and select all images.
3.  Use bulk action to set watermark.

What is the expected output? What do you see instead?
Full size image should have watermark image in required location.  However, 
despite not getting any errors, no watermark is present.

What WordPress / NextGEN Gallery version are you using? What browser are
you using?  Same result in any browser.  WP is ver 3.3.2 and Gallery ver is 
1.9.3

Please provide any additional information below.

    Operating System : Linux (32 Bit)
    Server : WebServerX
    Memory usage : 23.94 MByte
    MYSQL Version : 5.1.62-cll
    SQL Mode : Not set
    PHP Version : 5.2.9
    PHP Safe Mode : Off
    PHP Allow URL fopen : On
    PHP Memory Limit : 32
    PHP Max Upload Size : 100M
    PHP Max Post Size : 8M
    PCRE Backtracking Limit : 500000
    PHP Max Script Execute Time : 30s
    PHP Exif support : Yes ( V1.4 )
    PHP IPTC support : Yes
    PHP XML support : Yes

Graphic Library

    GD Version : bundled (2.0.34 compatible)
    FreeType Support : Yes
    FreeType Linkage : with freetype
    T1Lib Support : No
    GIF Read Support : Yes
    GIF Create Support : Yes
    JPG Support : Yes
    PNG Support : Yes
    WBMP Support : Yes
    XPM Support : Yes
    XBM Support : Yes
    JIS-mapped Japanese Font Support : No

Original issue reported on code.google.com by john.ima...@googlemail.com on 1 May 2012 at 12:52

Mlix / nextgen-gallery

Text watermark is working but image watermark is not. #494