A family of Microsoft word processing software products for creating web, email, and print documents.
One thing is, you do not really need the "Watermark" feature at all.
Watermarks, in Word, are graphics in the header that have a special tag on them to tell Word that they are a Watermark. That tag is used to delete it using the command or to replace it if you add another using the Watermark command. Except when using the Watermark feature, they do not matter.
You can simply edit the header and add the image yourself, setting it behind text and semi-transparent.
(This is a workaround, and also a way to do things you cannot do using the Watermark feature.)
Yes, text Watermarks, in Word, are graphics. The text is converted into a WordArt graphic and it is treated as a graphic, not as text, for other features in Word.