A custom face on an Apple Watch wouldn't tarnish the brand any more than a crappy iPhone app tarnishes the brand of an iPhone.
I can make an iPhone app look any way I want, why should watch faces be any different? I am truly saddened at this stance by Apple. They have missed a tremendous opportunity in my view.
Couple things. First, just because YOU don' think that a custom face would tarnish Apple's brand doesn't mean they don't. In fact they directly said they do think it would. Doesn't make them right, but it does make it how they think.
Also your comparison is not a good one. An app being designed however they want is also true for the Watch. You can design an app for the watch however you want, that is not the limitation. The limitation is on how the base operating system presents itself. If you want to compare it to something you can compare it to the Home Screen on the iPhone vs the watch face of an Apple Watch. One could then argue widgets on iOS now let you change the way it looks, which you may or may not correlate to complications on the Apple Watch. Really Apple is quite consistent in what they do and don't let developers modify.
Again not saying something is right or wrong or should or should not be. Just saying that they are clearly stating the boundaries and why THEY think the boundaries are there.