For future reference for anyone reading this thread; the problem was the watermark and has nothing to do with the file extension or the "full black eye."
1. OP fixed the watermark frame and it got accepted. Never did they mention anything about fixing the eye. If they're still using the head, that means it wasn't the issue. Plus, that's a death frame—not a frame they're walking around with on the overworld.
2. You can't submit (or make) moving .png files. You're mistaking those with .apng files, which as far as I'm aware iEra doesn't accept on the image upload website. .gif files are fine, both the OP and I have .gif heads and haven't had any problems. Era also accepts .png files but then they can't blink so.
3. Could also be a problem with image size and compression. If you made the head from scratch and have stray run away pixels it won't get accepted as well. OP could've got rid of those and not mentioned it because it's not as big of a change as removing the death frame and fixing the eyes.