He is saying the entry-level Apple Watch will not just be $400 more, but more than double the price of the Sport with the same band. Really? And again, a $500 premium for a leather band? Really?
I don't see any reason to believe that Apple will charge more for colors (at least outside of the Edition, where all bets are off). In all of Apple's product history we find only one example of them ever doing that, and that time they also boosted a tech spec for the model. Why would they now deviate from years of marketing method to turn color into a cost item? The logic is absent.
Product pricing is about more than costs of production, it's about creating a ladder of pricing steps that induce buyers to talk themselves into spending a little more. Apple doesn't pay anywhere close to $100 to install 32GB in an iPad over 16GB, but they know a certain percentage of buyers will find that $100 to be well-spent. So again, why would they deviate from a strategy they know well and has been so successful for them over the years? Gruber seems to think so but he makes no case for it.