Friend,
Decal paper, and waterslide decals in general, do NOT come with a "glue" to secure the decal to the object to be decalled. What most folks think of as "glue" is , in fact, only a very light, water soluble adhesive that keeps the decal film with the printed decal on it attached to the decal paper backing. That is why, over time, you will see old decals curling off the paper as the glue decays. Most decal paper has a solid sheet/covering of decal film coveringthe entire surface, but most sets of decals you get in, say, an airplane kit, have only decal film under where the decal was printed to save money and reduce the amout of trimming you need to do to get your decal. The decal glue is what keeps them in place and safe on the paper until you put it in water, whereby the glue eventually washes away and the decal comes free of the paper. Any residual glue left on the decal is not sufficient to adher the decal to the model and, in fact, is undesirable as it may discolor the underlying paint when the decal is truly correctly sealed.
What needs to be done is to apply a decal solvent , such as those produced by Microscale or Walthers, to name a couple. I prefer Walthers, myself, as it is pretty strong. The decal solution softens, and almost emulsifies, the decal film. This allows the decal to snuggle down tight against the model surface, for which a glossy, non-porous, smooth surface is best. Wood is a poor surface, but sealed and painted beforehand, it can be done without too much trouble. It can even be done on untreated wood, but takes a lot of patience and solvent applications, and even then perhaps some additonal pressure to get the decal to get down into the grain may be required.... a hazardous task, and the result is sometimes a "fuzzy" surface that just doesn't look correct unless you are going for the weathered "painted barn" look. For applicaton of the decal on a proper surface, all that is required is to wet the decal, slide it off into position, remove most of the excess water and let it dry in place. That is what you have done so far, but you ain't done yet!
After it is in place and the water is gone (or just enough is left to provide some "wicking action", carefully apply a little decal solvent over and around the decal. With practice, you can get it to wick under the decal thoroughly , but even if you don't, you will tell by a silvery bubble under the decal once dry. Simply poke a tiny hole with a pin in the "bubble" (I even run small slices along rivets or other difficult areas) and reapply more solvent. You may need to do this A LOT on wood. I use a q-tip wet with a lot of good ole spit for this purpose, and gently roll the q-tip over the damp, soft decal to carefully work it down real well. This method takes quite a bit of balls and experience, though, as the decal will get VERY soft and distorts easily if you are not VERY careful and VERY smooth and confident in your motion. If you are at all doubtful, just take it slow and work with a little solvent and a small area of decal at a time. Be careful, as the decal is very soft at this stage, all thru the solvent application process. Once the decal is thoroughly dry again, you can wipe excess glue, water and solvent spots before the last step, sealing.
This is usually enough to get a decal to appear to be "glued", but at this point it is just set tight against its' host surface, and will eventually chip, curl, or even just plain fall off!
Once the decal has been completely set and dried, a topcoat seal of some kind MUST be applied to in effect "glue" the decal and prevent damaging it thru normal handling and aging. This is especial necessary for decals printed on a typical home printer....most professionally produced decals have a second coat of "film" applied over the product or deal area, so they don't run or scratch easily, but your home printer won't and can't do this. Several decal sprays are available, as well as Microscales Liquid Decal Film for this purpose and shold be applied before handling. You should apply some BEFORE removing your decal from the paper to prevent damaging it or even to restore or save old, cracked decals. In any case, you should put something over homemade decals at some point. For a sealer, some folks use clear liguid acrylic floor wax, such as "Future". It has been used not only this purpose, but as a medium for sealing the original surface (good) and even floating/applying the decal into positon! ( I personally don't recommend this). Most modellers use some form of clear spray paint (Flat is best) to seal the deal and disguise the edges of the film, but Future is a good thing for a glossy finish.
In short, you have done nothing wrong..just haven't done it all the way thru!
GOOD LUCK, and have fun!
Brion
Model builder