When you unpair your S1 from your phone it will perform a final backup and when you set up your new watch it will allow you to restore from this.
That part will take care of all your settings, apps and setting up Apple Pay again.
Each time the phone is paired with a watch, even the same one, it will create a new 'Source' profile and will store all of it's health and activity data against that source (see sources in the Health app) - you won't lose any activity information or health information as long as you don't delete that pairing. All your workouts and achievements across all these sources will appear in the same place in the Activity app of course.
There seems to be no way of squashing or merging these sources so if you end up having to re pair with the watch several times you will end up with more and more of them