Yes, the c and p are for cropped and proportional. You can just change the sizes, but you'll also need to look in the common/properties.php file and make sure the size is also listed in there. There are 2 arrays with sizes for cropped and proportional, so edit those arrays as needed for your size.
Reprocessing the images can be done by selecting your gallery, then processing the watermark. Even if the watermark is blank, that will force the new sizes to be created.
Images are stored in the images/[gallery ID] folder. You'll see the originals and all the sized images in there - with the size and c or p suffix.