If they were to add a camera to the Watch, I think this is exactly how it should be done, for a couple of reasons: First, it addresses the concerns of many people (and businesses, government, etc.) that don't want a camera on their wrist. If it's in the band, you just use another band when you go to work, or if your concern is style, etc. Second, properly positioning the camera really is the trick with something on your wrist, especially since you'd ordinarily want to see the screen at the same time you are holding the camera up. Putting it on the band arguably gives people the best chance of doing that.
What many of us *don't* want to see -- and emphatically don't wan to see -- is a camera on the watch itself.