Your error log results in $overlay instead of its replacement.
imagecache_canvasactions.module @136
watchdog('imagecache', 'Image file does not exist. Attempted to overlay $overlay');
Variables in single quotes aren't being replaced. Use double quotes or . operator for string concatenation.
Comments
Comment #1
dman commentedYeah. Thanks. Just a usual typo
Patched in DRUPAL-6 dev.