That is the correct way to go about editing the captcha properties, I just tested on a form I created and the changes are being made.
the changes are applied as query string variables to the WAVT_CaptchaSecurityImages.php file. For example, the changes I made in my test changed the img tag from:
<img src="WA_ValidationToolkit/WAVT_CaptchaSecurityImages.php?field=Log_in_group_Security_code&font=Fonts/MOM_T___.TTF" alt="Security Code" class="Captcha" />
to:
<img src="WA_ValidationToolkit/WAVT_CaptchaSecurityImages.php?field=Log_in_group_Security_code&bgcolor=FF6633&transparent=false&noisefreq=25&noisecolor=99CCCC&gridfreq=50&gridcolor=999999&gridorder=0&font=Fonts/MOM_T___.TTF&characters=7" alt="Security Code" class="Captcha" />
can you see any changes in the image source on your page?