I am trying to use a png 24 watermark with transparency but when I do the images do not load. Is there some specific format I need to use for the png?

png24 is the format to use and there are no variants. You should look at your server's error log if there is anything noted.

I've saved my file as a PNG-24 and it still doesn't work if I have transparency on. If I turn transparency off it works just fine.

Then probably your server's graphics libary (we support GD or Imagick - see requirements) is not configured correctly or an too old version. You will then have to contact your host.

When I rerun setup.php I get this "Graphics support: PHP GD library bundled (2.0.34 compatible)" is that an old or incompatible version?

GD 2.x should actually be fine. But it may not be setup right or supporting transparent png24 at all. Best chance is to contact your host. He is the only one that can help then anyway.

Is there something specific I should ask my host to do. I am not familiar with PHP module settings.

Ask if their GD libary has Png24 support for example. Zenphoto tries to add (or merge if you will ) the png24 image on the actual image. That is apparently failing.