I think what tl01 means by "they can't set it up both ways" is that "you can't please everyone", i.e. some people will expect or prefer that the larger screen displays the same thing larger, while other people will prefer that the larger screen displays the text at the same physical size so that more text fits on.
Apple has clearly decided that for the Watch, having the larger screen display the same thing but larger by default is the most appropriate of the two options.
I suspect that they've done their market research and for a lot of people, being able to have the text physically larger is a selling point of the larger screen, as not everyone's eyesight is perfect. If they were to have the default set such that the text is identical physical size, many people with less than perfect eyesight might look at the larger screen and think "I don't want a larger screen so I can have more more tiny text that I can't read, I want a larger screen so I can have the text bigger and be able to read it more comfortably!".
And... if your eyesight is good and you want to fit more text on, you can adjust the size. Easy.