Your first sentence is a bit confusing (very very long!!). Are you saying you bought a Watch from someone who had it in the Developer program (and had the developer profile installed)? When you reset the Watch, all that should have gone away (as it is associated with the former owner's iTunes account, not yours). So, if you're on WatchOS 3.1.1 right now, your wife should be ok to have her phone pair with it. Though, I am a bit confused by your statement that you had to update your phone to pair it. What did you have to update to? If just iOS 10.2.1, then you're fine, I think.