I used a thin piece of plastic (actually from the Watch packaging) and gently ran it down the side to see if it dislodged the "dust". It didn't budge. Might be glue, i don't know.
Its quite hard to see, but there is definitely a gap there. I just assumed this was the usual build quality as i've not seen another Watch up close to compare.
Unless Apple changes their stance as of right now I have been told it is not acceptable by two different sources at Apple.