Yes free version is limited to 20 which can go by really quickly, many times you will try and simply not like what it has come up with. And yes the free has the watermark. Paying the in-app get rid of the limit as well as the watermark.
One thing the previous version had that this doesn't any more was comments for images. Now it is simply like or leave it..
I found that I was running into the 20 dubble limit really quick so in the end paid the in-app
Yes you will also find you camera roll swells though you could just leave them on their servers. Right now I have I think around 2800 on their servers... (mostly from the last version). Generally if I like it I will save it and move it to the desktop about once a week.