Ok, here's the solution for this problem:
First of all, this is not the problem of JoomlaWatch.
This problem is caused because of the presense of UTF-8 BOM (Byte Order Mark) in some of your Joomla files being included before the actual image.
You need to remove the BOM. This is a way how to do it, and I've already fixed it this way on one of customer's website:
1. Download the whole content of your remote joomla into your local directory. (FTP)
2. Use Total Commander and make sure you are in the directory which contains files and directories you downloaded.
3. Press Alt+F7 (or Commands -> Search via menu)
4. Tick Find Text and next to find text type the following: EF BB BF
5. Tick Hex
6. Click "Start Search"
This will scan all your files for presence of BOM. The binary files like images are ok, we are mostly interested in text files like PHP/XML/TXT etc.
If you'll find such files, DO NOT USE WINDOWS NOTEPAD !
7. If you'll open affected file in Total commander using F3 (view), and will click Options -> Hex, you will notice the leading EF BB BF characters (these characters are invisible normally)
8. Use some better editor such as Notepad++
9. Open affected file(s) in notepad++ . From menu, click Encoding (most likely the Encode in UTF-8 will be selected). You need to Click "Encode in UTF-8 without BOM"
10. Save the file(s) and upload to their original location.
This should do the trick. This problem is so frustrating, but I hope this steps will help you to get rid of it. Good luck