I've got to say, this is a fantastic contribution and works brilliantly once I'd figured out the correct document root path on my 1&1 web space (tip for anyone else on 1&1...add /htdocs/ to the end of the root path shown in the 1&1 domains list).
The only issue I'm encountering is rather sluggish loading of watermarked images in the popup window. The window appears straight away, but remains blank for around 20 seconds until the watermarked image finally appears. My images aren't particularly large (about 40KB on average), so are there any settings I can modify to speed up the watermarking process?