It has been my observation of the recent sales page that the number of images that sell with watermarks is roughly proportional to the number of people here who use them. Watermarks MAY inhibit SOME sales, but they clearly don't kill all sales by any stretch of the imagination. My first sale came after I added watermarks.
I decided to use watermarks because a 900 pixel image can easily be lifted off of FAA's pages. From that anyone with no image editing skills whatsoever can make a presentable 8.5x11 print on any home printer. When I managed to do just that in under two minutes there was no question that I needed to add watermarks to all of my images.
Also, Pixels.com royalty free licenses come in several sizes.The smallest two are 1,000 pixels and 500 pixels. Nobody's going to pay for a 500 or 1,000 pixel download if they can "lift" an unwatermarked 900 pixel copy for free.
To reduce confusion I put a notice in every gallery description, every image description, and in my bio, that the watermarks won't appear on any purchased products or downloads. FAA also puts a notice on every order page. Even these may get past some dense minds, but I figure most people will get the message.