I think you would be surprised how few people actually upgrade every year. Most people upgrade every couple of years. Tons of people still never had an Apple Watch. For all these people the S7 is superb and will sell just fine. And for me personally the larger screen with smaller bezels, brighter always-on display and faster charging are reason enough to upgrade from S6.
A lot of people are glad the Watch didn‘t become as boxy as the iPhone/iPad. Also, according to Apple the shape is not the same, but actually even more rounded.
20% is not slightly and was surely not easy to make happen in (almost) the same size enclosure. How could you not ask for maximizing the viewable screen area in a place that is so naturally limited in size as the wrist?
I see no blue in Midnight aluminum. If anything, it seems to be a darker grey/black than space grey ever was. We‘ll have to wait for real-life pictures to be 100% sure there is no hint of blue there.