On some level I don't mind DRM in library books - a way of managing them. I tolerate it. Sometimes I borrow a badly formatted book and completely resent that it reads like crud on my reader, though.
But I have borrowed a few library books that are OPEN epub books (and no, they are not the gutenberg public domain - they are actual commercial books) - they are based on the honor system, that the user will delete when done. Quite useful since my current reader is a kindle.
Watermarking I couldn't care less about. I mostly care about the ability for "free as in freedom". Watermarking doesn't seem to prevent that afaik.
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