I think iWatch as a name is interesting.
iPhone has a primary function being a phone.
Presumably one of iWatch's primary functions won't be telling the time, which you expect from a watch.
Calling it iWatch could transform what we think of watches generally. Now when we talk about tablets, we're talking about computing devices. While iWatch could be a brand name, watches could become the generic term for other devices that do something similar to what an iWatch will do.
It might be one day that when people talk about watches they'll say, "Can you remember when all watches did was tell time?"
This might be a reinvention of the watch but also a reinvention of the purpose of a watch. What is really being co-opted is the location and idea of having something on the wrist. Is that enough to take the name watch?
I watch an iCar.
PS: gotta love wine.