Help With watermarks, and Graphics tool kits.

Hi,
I have got gallery 2 up and running no problems..
I am having trouble getting watermarks to work.

A link to the album is here: http://www.grahamsweet.com/2008/gallery2/main.php

I have managed to create a gif watermark as you can see. The transparent background works, but the see through letters do not work.
When ever i try to upload a png file, or a tiff file, it does not show the image on the "place the watermark " screen.
I can however see it on the main page where you can select watermarks.
- If i set the png as the watermark to use, the images all come up with the "broken image" thing.

I do not have imagemagik, ot netpbm installed.. Have tryed, but cant get either to work.
I do have GD installed - should that be sufficiant to work with watermarks?

I have tryed creating the png in Corel, fireworks, and Photoshop and had the same results.
Also tryed using internet explored, firefox, and google chrome, same results.

Any help, much apreciated.
Cheers.
Sion.