First of all, if anyone has noticed, Apple has shifted focus. Apple is selling to the mass market - no more select markets.
They revised their Pro software to be more user friendly and affordable. They give the OS away for free. Their Server OS is equivalent to a meal at Olive Garden. They ditched the Xserve. The Mac Pro no longer looks like a desktop class workstation. It was refined to be smaller, still powerful, and target the higher end of the mass market still. No where is it an 'enterprise' item. Apple TV was reduced to 99 with the HD removed to use their cloud service, reduce cost, and make it available to more users. iCloud is a free service unlike .Mac and Mobile Me. All their MacBook lineup had price drops several years ago of $100-$200 to make them more affordable and inline with the market.
If you can't see this trend, then you are clearly blind!
No way will Apple sell an iWatch for more than $399 as an entry level device. Maybe the high end will be $599 but that's about it. Personally, I think it may start lower than that. I'm thinking more like $199. I doubt it'll incorporate fitness stuff into the watch - except for a HRM. The iPhone is the tool to measure your tracking with GPS, HealthBook app, etc. The watch is simply a tool that works with your phone to display notifications, time, and maybe interact with Siri. There's not much cost involved in accomplishing this. It'll also give much longer battery life by doing this. 5-7 days, maybe even 10 knowing Apple.
Even the iPhones are around $800 but Apple looks at it as $199, 299, 399 with the carrier subsidies. No one is going to subsidize a watch.