That was going to be the next thing to do, delete all the folders in the bmz-cache folder. Could have been a corrupt image or folder.
Glad it is working for you.
Your watermark image for medium images goes in the images/medium folder.
Your watermark image for large images goes in the images/large folder.
You can make the watermark as big as you need it as long it is no bigger then your large product image.
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