Since a watch is just as much a fashion item as it is a functional device, the trick is always going to be the design.
I think the Nano + 3rd party bands had it right.
Make the iWatch modular, with by-design mounting points, so 3rd parties can really open up the options for bezels/bands/holders/cases. The package would be a standard band, maybe in a couple of finishes/colors, plus the "core" which is the electronics and an edge-to-edge display (so even the front color is determined by the face/color/style you select).
Also, a watch needs to be slightly more environment tolerance vs. a phone, talking a minor amount of water resistance, or even a meter of water proofing. It's got to be able to get a little wet from rain, washing hands, etc.
That's why I'd also design it as one solid piece (the core portion), without any physical ports. BT for communication, audio (or potentially some kind of WiFi variant), and then either a capacitive type charging solution (even built into a nice stand), or maybe a Magsafe variant (that would still be capacitive I suppose), where a little magnetic coupler just sticks to a "port spot", which could also provide a standard USB interface, Magsafe headphones/earbuds, etc.