Historically, Apple's 2nd gen product has always been radically different from the first. One reason for this is that during the development process, there comes a point where the design has to be frozen to allow pre-production and software development, despite what they may have learned in developing the hardware along the way allowing them to do things differently. So that knowledge is immediately funneled into the second generation model.
So I disagree with your prediction, though other than historical precedent there's nothing that makes mine more accurate than yours.
That said, once the early adopters buy the watch, and let's face it, those die hard Apple enthusiasts are often the only ones who return to the trough the second year after buying the first generation models, before the product is widely adopted by the general public. So the question is, what must-have features will Apple add to the hardware? The first gen watch will most likely get all the watch OS 2 updates, so there will have to be physical changes to the watch to make early adopters of the first gen model rush out and buy the second gen. Otherwise Apple will be struggling to get more customers for it, with the "old news" of last years model, which the luminaries of the fashion industry will likewise be "over". The best way to do that is the way they always do it -- new design and/or hardware features.
It will have to be more than GPS which appeals to a limited user base. And it will have to be more than internal speed bumps, and power management to appeal to a broader public. A round watch might boost numbers from the fashion conscious, though not from the original tech guys, but it will have to offer something truly different like a camera to get general attention from the public and tech community alike.
Apple really did themselves a disservice putting everything but the kitchen sink into this model, giving themselves little room to quickly grow for the next edition. It's going to be hard to squeeze something new into the next watch it doesn't already have, which is enough to captivate the public, as well as the fashion and tech world, but that seems to be the bed they've made for themselves.
Then again, they could just rest on their laurels, change nothing about the hardware design, add a few new watchbands, speed bump the chips, and call it a day. Somehow that doesn't seem like Apple to me.
