Since Jony Ive has said he understands that as soon as a customer wears a product they have the expectation of choice, so by Gen 2 I would expect to see a smaller 34-36 watch, and maybe a larger watch as well. So four models altogether.
We can expect to see different case materials, especially a $1-2K gold colored option, and gold anodized aluminum. Gen 2 will definitely be slimmer. And there will be a round model, though that may take until Gen 3 -- it depends on how serious Apple is about this fashion thing.