Battery Life
By far the biggest issue - you solve this and you solve a whole host of restrictions. A week would be nice, but just having enough for a weekend away without having to lug another charger would be good.
Wireless charging
Not what we have now. Make a pad that I can drop the watch on that sits on my bedside table. Same pad to charge my phone. Longer term I expect to see house-wide wireless power where it will charge from just being in the house and so long as I return home regularly, I never have to worry about charging. I'm sure they are looking at this for a future model.
GPS
I am guessing that this is tied to battery life. Time for some Apple magic to work out how to make this work. Health tracking for running/biking should get better and it goes a long way in letting you exercise without having to attach a heavy phone to yourself.
Waterproof
This will be difficult while keeping a microphone and speaker, but this is a wishlist, not a solution list.

Id like to be able to shower and swim and have my swimming tracked. Id also like it to detect being submerged and begin tracking swimming automatically. My dive watches can do it, as can some of the other fitness trackers.
More health sensors
The biggest would be blood pressure. Can you even do that through a watch? Not sure, but Id still like it. Other than that, sleep tracking would be nice (which needs battery life >1 day if I wont have it on the charger at night).
Adjustable screen time out
With wrist-raise, the screen often times out before I am done reading it, so I get to do a weird looking wrist flick to get it back. I have 60% battery life at the end of the day, so I could have it last much longer without affecting my battery life. Make it an option to adjust the timeout.
More Apple Pay
The watch does this fine already, but I dont/cant use it often. Partner with few companies - Subway for example, where I pay every week but their card terminal is behind the counter. Get their head office to push out terminals that are in front of the customer and have the APay logo on them and have all their staff go through a video training so they are aware when someone wants to use it. Then move on to the next common place - panda express, boston market. Im sure Apple would prefer retail stores with bigger transactions, but I use these places every week. They could use more coverage at this point.