If it could accurately measure blood oxygen levels up to Apple's standards, why wouldn't it have been included as a previous feature given the health value of that kind of capability? Could be that it's not accurate enough in older sensors, or there's been an FDA restriction. Either way, I don't know enough to say confidently which Apple Watch models will get that support.
Yes, it would not be accurate. This Wirecutter article gives a high-level review about what's on the market today and why, even the expensive ones just aren't that accurate:
https://www.nytimes.com/wirecutter/blog/coronavirus-pulse-oximeter/
Apple is currently relying on the surface of your wrist. Even though this method using light isn't the best, it should ideally be done when you have the light pass through (e.g. tip of a finger). So measuring a round-trip bounce off the wrist is going to be even lower fidelity than than a straight shot through. Again, even if we had a little finger clip, that still doesn't compare to what you'd get in the hospital if this was actually important to measure.
Lastly... and then I'll just let people click through the link above, an interesting point was that it's not really a useful data point. Even where you think it could be its
most useful – keeping an eye on someone diagnosed with COVID-19 – it's just a fuzzy estimate. Then in all the other times you don't have a terrible respiratory condition, it's extra-pointless. At least HR or BP could reflect your fitness progress for example.
Haha I sound like I'm against updates such as this, but to be totally honest I'm a sucker for quantified self and would enjoy seeing this blood ox measurement in my watch. I just want to help other people be aware that it's not gonna be super accurate and most definitely not reliable.