i took 8 steps back from my computer and i could still read them
tell him to relax, they're fine. the font is as large as all the other text on the site.
in fact it would be much nicer if he'd let you get rid of them all together and just credit him at the bottom of the page with a link. the watermarks don't really help the user since its not a watermark of his url, and the image doesn't link to his site. all it tells me is the name, and its up to me to go searching around for his contact info.
perhaps his concern was protection, but anyone who really wants to use that image without his permission could easily photoshop any watermark out, they would likely be photoshopping it anyway, to get rid of the border and inner shadow.