Okay, I can now say, without a doubt, I prefer wafer.
I did 2 dozen image cookies this weekend. Part were graphics and part were photos. I used wafer paper for the graphic illustrations and frosting sheets for the photos. I applied both to wet icing.
My cookies were not real smooth, unfortunately...I tried a new cookie recipe and it didn't go so well....anyway, so that could also have been a factor...but the wafer paper laid down nicely and gave a great appearance. The frosting sheets turned out all bubbly and I needed to redo 8 out of the 12 photos. (Grrrr. There goes the profit on this job!)
Still, the photos just don't look good on the wafer paper. So I just scraped the icing off, and reflooded 8 cookies, and am letting them dry smooth this time, and then I'll apply the frosting sheets, which I'm printing right now. (By the way, that tip of putting them in the freezer to get a nice release works!)
And, here's also a tip on the wafer paper. People comment on the edges curling. While I was flooding the cookie I smeared (with a basting brush) a mixture of icing and corn syrup on a piece of wax paper and put the wafer image in it to "soak" (careful not to get it on the front.) I didn't have any trouble at all with curling edges.
Also, I did a taste/texture test. I think I actually like the texture and taste of the wafer paper better as well.