They seem to be hot linking your images. Do something so that the hot linked images they get served up are all about how they are goat raping thieves.
From there you could do any number of things. Always serve up one single "hotlink.jpg" image. Rewrite all image paths to include a special "/hotlinked/" folder so all you images get duplicated and then water marked. Rewrite all images paths to send the original image path to a script that would dynamically watermark or swap images. I'm sure there are other things you can do. But the main objective is to not have to change any of your own source code.