One of the things Apple does really well is combine devices that previously stood alone. So while they won't reinvent the fitness watch, or the wearable ipod, or the wrist notification center, they may successfully combine these things into one device in a way others haven't yet.
Also to your point about replacing Tags or Rolex or Nixons... I don't think an iWatch will target the people who buy/wear $2k status symbols. I would expect it to target practical users, people who wear $100 watches to tell the time (and be a little stylish.) I have a really nice Skagen that I can't wait to ditch for an iwatch. In fact, I've been holding off buying a bulky gps running watch in hopes that apple will release something cool that will fill that purpose. (the same way I rarely ever pull out my point & shoot camera anymore, thanks to the iphone.)
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Apple was the first to use capacitive touch screens, but they were out there for anyone to use first.
Part of what made it work was the programming behind it that made smart guesses - that if your finger is touching 3 things, it figures out what you meant to tap. As opposed to a pressure sensitive screen that needed the precision of a stylus.
I agree that there was a timing issue for apple getting this right, but if apple did it, clearly the tech was available for anyone to do it. Apple just thought of it first, and did it right.
In fact, even after the iphone came out, many companies were still coming out with pressure sensitive touch screen phones, they just didn't 'get' it. (my GF had a really ****** samsung "smartphone" that just wasn't up to snuff.)