I edited your post to get rid of the smiley :S
You have three options:
1. If you can modify how the data is generated then combine Address1 and Address2 into a single column of data and use a newline character to separate them:
FirstName:LastName:Address1\nAddress2:City:State ...
As long as you leave off the newline character when there's no content for Address2 you should be all set.
2. If you cannot modify the data you could turn on HF scripting and write a small script to modify the manifest before submission (same result but you do not have to change anything upstream).
3. If you do not want to do any scripting at all then you could use the Job Characteristics to check the content of Address2. You can't check for whether the field is blank but you can check to see if it uses a vowel or a number as a proxy for checking to see if it is blank. You then use that job characteristic to route between two different watermark presets - one that uses Address2 and one that does not.
