I pasted in a texture of a button that's small, tried to move the fuzziness. Tried main screen, front window, area. NOTHING seems to trigger it. Fuzzy all the way up, all the way down, middle, 75%. I activated permissions in system settings... maybe i need to reboot the machine and it will somehow work... i'll try that now but so far no luck.
That may be your problem. You pasted it from where? It sounds like you copied the image from an app. That's an unreliable way to do it. You should be taking screen shots directly using Shift-Command-4 which is a reliable mechanism.
Another possible problem is that you may have left the action (or condition) with the value of "Unique" when in fact you should usually change it to "Best." If you don't do that, and there are two copies of the image on the screen, the action (or condition) will fail.