Someone earlier posted a bunch of the apple watch settings screens.
One setting was for how much storage you want to allow for music. Another was which playlist to sync. SO, it appears you sync one playlist at a time. Seems fine to me but I doubt I will use that feature.
They had similar settings for photos. How much storage to allow and which folder to Sync. I loved this because my phone already has a favorites folder I use to quickly bring up the pictures I share the most so I can avoid hunting through the 17,000 pictures I actually keep available.
Where did you find out the watch has 16gb?