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I wold prefer you to have "This video was provided by YOUR-SITE-HERE" spash at the beginning or in the middle than watermarking the video.
The reason is that... if I want to put an image/link/logo on the flv player side then it will override your watermark and you will not be happy. On the other hand, a logo/image with another watermark under it looks really ugly.
Other than that, I see no other reason for rejecting a watermarked video.
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