My understanding - at least for Australia - is that eBay have backed off from the "No watermark" policy.
As for other sellers stealing photos - there are two kinds. The ones that will copy an image, save it and put it up on their own hosting ... and those who simply use your hosting by just copying the URL.
With these lazy ones, you can do some really "fun" things. The best I have heard of consisted of a seller changing the item photo in his listing to another name and then uploading a rather graphic image with some very clear text outing the thief, using the original name - the one the thief was using. Visitors to the thief's listing would see the message ... and something rather shocking. They contact eBay and dob them in for pornography. Instant takedown - and possibly a suspended account!