Poor pup!
I think the problem with the xray is two-fold…the background on the Xray isn’t white - it’s actually light gray - and when you engrave any color at all other than white, it burns it…so you’ll get a solid block of color.
Here’s the Xray on a pure white background…you can see the difference.
When you do a quick levels adjustment in Photoshop you get this, which gets more of the background into the pure white range:
fenway dysplasia 2 led.zip (347.9 KB)
The other thing is that for photos…the Draft Photo selection might work better for the engrave, not variable power. (That’s for depth.) Removing some of the now white background, saving as a PNG and reloading the image with a Draft Photo engrave setting (draft actually does work better for photos) gives you this, which might be what you are looking for.
Give that one a try and see if it works out better. (Is that for a Halloween display? Cool idea!) 

(Oops…I don’t think I reversed it.)