This isn't a display limitation, it was a design choice Motorola made in order to minimize bezel. The LG Watch R and LG Watch Urbane, for example, have completely round screens. (I have an LG Watch R and like it)
Actually it is a limitation in needing a spot for the display hardware to connect. The reason it doesn't show up on the LG Watch R (nice looking watch BTW) is precisely because it is hidden in that larger bezel you mentioned. That design works especially well since it has a squared off part that extends beyond the circular bezel which connects to the band. That appears to give it ample room for connecting, while still looking like other modern circular faces. My current watch has a similar design but in stainless steel with link band. I would definitely be interested in an Apple Watch with a design similar to this as it reads more like a watch to me.