I can't speak for the processor manufacturing. But I think it goes beyond shrinking down the processor, implementing a larger battery to incorporate features for GPS and perhaps the future generation of LTE.
And I think most seem to forget, traditionally larger mechanical watches are top-heavy and thicker based on style and substantiality. Other seem to subject the Apple Watch into a category of its own believing it should be thinner, when that's not the answer to everything just because it's a smart watch or piece technology.
Exactly. I was worried about this, but the Apple Watch feels chunky and substantial, just like my very nice mechanical watches. Now that I have mine, I like the form, including the thickness.
Watch orientation. I thought you meant taller in the depth measurement, as in 'it sits taller on my wrist'. Judging by responses many or most others are interpreting this as well. The correct and objective terms to use are Height, Width, Depth and Weight.