After you click on “Select image”, upload or choose existing one from Media Library and click “Set as watermark”, normal behavior of plugin is to refresh page becouse.
That is no actually refresh, its submiting form for saving changes (just in case when you select image, and new one appear, you can forget to save if no other parameters changing)
After that if you get blank text box and text “No image selected” is sign that your image is not acceptable. Ie you try to upload image that is no .JPG or .PNG