Using George's way, you don't have to put it in the header, but it will print only on the page where you paste it.
If you use the "-" top margin to set absolute position, you should be able to use George's way in the header to get the "washout" effect. Since the header should print first, and text in the body of the document will overprint it, you don't have to do the "behind text" setting. Unfortunately, for images in the header most of the usual picture adjustments, including the "Location" controls, are grayed out in the Image Toolbar, so you'll have to insert paragraphs** ahead of the picture to move it down, and you're limited to Left (Ctl-L)/ Center (Ctl-E) / and right (Ctl-R) paragraph alignment for horizontal location.
** Hint: Insert ONE paragraph ahead of the one where the picture is inserted, and adjust the font size for that paragraph to move the picture up and down. The drop down only lets you select up to 72 pt (1 inch) but you can type anything larger in the box. Word should accept font sizes up 1638 points, which is 22 inches - the maximum page size you can set in Page Layout.
If you have an image editor, you can add white space around the actual image, one side or the other and top/bottom, in the picture file before you insert it into Word, to make the image locate fairly precisely where you want it.
By putting the image in the header it should print on all pages of the section.
It may be just the particular picture I picked for a test, but it appears that the "Watermark" printed from the header is a little "paler" than when it's inserted in the document body and moved behind the text. To make it show a bit more, if you need to, when you apply the "Washout" picture mode reduce the brightness slightly.