I have done all of that but now all the photos are still like 640×427 or such. Do I have to re-upload all of them again?
Yes, you have to upload them again after you set in Table IX that you want to save the original sourcefiles. The easiest way is: ftp them to your depot directory and import them with the update checkbox ticked.
See the Photo Albums -> Import screen for the location of your depot directory ( usually something like …/wp-content/wppa-depot/[username]/ ).
I just tried to upload another photo with copyright in the bottom right corner inserted during upload.
The watermarks are applied to the display ( downsized ) files only, never to the source files. This enables you to remake the display and thumbnail files out of the sourcefiles with e.g. a different watermark.
This also allows the download of un-watermarked files.
If you want watermarks on the hi-res ( source ) files, you have to apply them on your local pc before uploading.
This is how it is designed and works.