What I find interesting is they could easily connect the Watch to iTunes through the phone. Look at Xcode. If I connect my phone, it'll show not only my phone, but the Watch paired to the phone. Obviously, DFU mode is there on the Watch. If they make it so when the Watch is in DFU mode it can establish a Bluetooth connection to the connected iPhone, then the user plugs the phone into iTunes, I don't see how a software restore cannot be done OTA.
I'm not one to go off spurting 'Apple is scamming us out of money', but for those people who have had their Apple Watch bricked, it certainly seems like this is the case. I know its a beta, but at least if stuff happened on pervious devices you could DFU it and restore it. Another way would be to allow people to send in the device to Apple or take it in the Genius Bar and have it done there. I'm sure that diagnostic port is how they are reloading the factory image. Why not give each store a way to access the port, and plug it in to a computer to restore it to an image stored on the central server for each store? Maybe charge for shipping if it has to go the facility, but that's it. They aren't replacing it, just flashing the firmware back.