I meant an iSight camera, not one for FaceTime. The best camera is the one you have with you and you'll always have your Watch with you, even if you decide to leave your phone at home (i.e. out for a run, going to the beach, etc). Apple has made a name for itself as the leading camera manufacturer with the iPhone the most widely used camera in the world. iOS 10 reflects that. It's a natural extension to put a camera in the watch which is only going to grow more and more independent of the iPhone and more powerful.
As for a FaceTime camera, it doesn't have to be gimmicky. I wouldn't expect many people to do it for live FaceTime calls since as you pointed out, it's not ideal to hold up your wrist for long periods of time. What you're forgetting is that that's not the only way to send video. Apple has made short video messages a major feature in iMessage. Lifting your wrist to record a quick 5-10 second video and sending it off is perfectly well suited for the Watch's use case.