From your photo, I don't see any nicks in the blade, but it appears that the blade may be slightly cambered. The blade angles back slightly towards the sides to get smoother cuts. It helps prevent gouges from the corners of the blade. Veritas makes a special cambered honing guide that wobbles from side to side to help you get that cambered blade for your hand plane (Note: I do not
own one, yet
A cambered blade like that is used to get the smoothest wood surface. With practice, you can get a very polished surface on your wood.
Be very careful of dry, motorized sharpening, such as typical shop grinding wheels. They can put a new bevel on your blades in a heartbeat, but the problem is that they can overheat your blades in less than a heartbeat. If you overheat your blade, you damage it by softening the steel so that it can't hold an edge. You can't overheat your blade if you sharpen by hand, or if you use a specially designed wet or "heat sink" sharpening system.
Honing a new bevel on your blades takes time and patience, especially if you plan to do it by hand. Having a very very course stone to start makes a big difference, but you also need good collection of successively finer stones. I suspect that your water stones are too fine for putting a new bevel on your blade. Yeah, it would work, but it would take so much time that you lose patience (and wear out your water stone quickly!). I suggest that you start with a courser (diamond?) stone and working your way up to the finer water stones may be the answer.
I got a very nice set of chisels from a retired woodworker, but they needed restoration. I spent several hours apiece
restoring those chisels, starting with flattening the backs and putting on fresh new bevels. I started with a extra course diamond stone and worked my way through course, fine, and extra fine diamond stones, before switching to the 1000 and 6000 grit water stones.
I use an inexpensive honing guide, which keeps the blade at a set angle. My secret is to be extra patient when setting the angle. (I made a simple wood jig that sets bevel angles, but I found that it isn't precise enough.) Instead, I use a flat piece of glass. I set the blade in the honing guide with the bevel against the glass. Next, I test the angle by moving the blade across the surface of the glass with the bevel flat, watching the honing guide wheel as it touches the edge of the glass. If the wheel bumps into the glass edge or floats above the glass surface, then adjust the honing guide until it is a perfect fit, with the wheel just barely kissing the surface of the glass. Then you know that you matched the bevel angle with the honing guide.
Once you get the back flat and the bevel set, you can use your newly sharpened tool, but it will need to be resharpened from time to time. You can restore the edge with the finest stones. If you maintain your blades, you will not need to start from scratch again with the course stones.
gives an excellent description of how to restore and sharpen a hand plane. There are lots more procedures and videos on the internet, too.