You are talking about selling the 42 Sport at half the current price! Assuming that the $50 for a Sports band is pure profit, you'll have to get someone to buy 4 extra bands to make up the $200 difference. And you've got to admit, price conscious consumers who find $350-400 too expensive for a smart watch are the least likely to buy extra bands.
Also, does this hypothetical $200 watch have all the same features as the $350-400 watch?
I'm inclined to say Apple does know what it's doing with the pricing. Maybe next year, they'll offer the older models for $50-100 less, and that way the price-conscious consumers will have something to buy. But it's okay if not everyone buys a watch this year. The platform is still developing, and the truth is, early adopters are beta testing this thing. If those people who think $350-400 is too expensive buy one this year, many of them will probably end up returning it, because it doesn't "just work."
It wouldn't be the first time Apple chopped the price of s first Gen product and we all know how that went.