The Apple Store that I frequent is awesome and extremely busy. I bought my Apple Watch there last week and although it was still on Watch OS1 and I had to upgrade it myself it was not that big of a deal to me. I don't expect them to upgrade everything in the stockroom the day an update comes out. If they did that you'd have people complaining that the seal was broken and the unboxing experience was ruined. If your watch still was on OS1 there is no telling how long it was sitting in either the Apple warehouse or on the shelf in the backroom, so just because it wasn't updated isn't a bad spot on Apple or the employees at the store. Since the watches need to be paired with an iPhone then the watches themselves that are on display are not fully functional and are running demo versions of the software. The primary focus of those watches is for you to try on and see how it looks on your wrist and show some of the possibilities of the watch, not all the possibilities, just some of them. If it wasn't for this, then I would have gotten a watch that didn't fit my wrist correctly and would not look as nice as the one I ended up getting.
In regards to the experience at the store, I do agree that employees at the store should know about the products they are selling, but at the same time I don't expect them to know how to do every single feature or procedure in any given product. The Apple Store does sell a lot of products and maybe the employee you encountered was not up how to do everything on the watch, but they may have been able to help you with some obscure thing on an iPhone or iPad. They could also have been on their first day or week and working in the Apple Store was thier first encounter with Apple products. I worked over 10 years in retail and the problem with consumers these days is that they expect the salesperson, often making minimum wage or just above it to know everything about every single product being sold in their own the store. In most cases that is an impossible task at best. The reason for this is because consumers are too lazy to learn about a product by reading the manuals or experimenting themselves with the products, they just want to be handheld and shown how to do everything. In regards to the salespeople, the reality is that there are employees that are "experts" in certain products and employees that are experts in other products. They can't know it all no matter how hard they try and they do try.