Outlook may be open but your code creates another Outlook application
Code:
Set OutApp = CreateObject("Outlook.Application")
If you want to take advantage of the open Outlook you must use the Outlook application that is open. Your code doesn't do that. The code I posted will ensure only one version of Outlook is used and it will open or access it so that it can be used to create the message. The line I isolated above does not do that.
You can't use an existing watermark in your message body as watermarks are set in the header footer story range and e-mails do not support header/footers.
Create you message as a Word document. The macro will copy the complete body of the active document, including any graphics anchored to the body story range to the message. If your graphics are anchored to the header/footer range, bring them out to the document body and then the macro can copy them.