I've been an active user of a watch similar to what you are commenting:
Matsucom's OnHandPC (now defunct, there is info in
http://www.pconhand.com).
It was really bulky (similar to a Casio G-shock), and boasted a 102x64 LCD.
It was programmable (it had a nice DOS clone for the 16-bit embedded processor it had, a Panasonic MN10L200 2Mhz chip). It had an SDK that used gcc. It was my first exposure to cross compiling toolchains (I managed to get a cross compiling environment in Linux, whereas the included toolchain was for Windows ;-).
I read some project gutenberg books in it (over a dozen), until my wife and my mother finally convinced me that "that wouldn't be good for my eyes". As a matter of fact, I don't think that it was so bad for the eyes, but finally, the joystick of the watch died, so...
The screen was a little less than 2 inches, but with the correct program and font, it was pleasant to read (8 lines of text, with a proportional font, it managed to have an average of 5 words per line, IIRC). I didn't distribute my reading app for lack of time (although I distributed a modified text reader that someone else did that I used at the beginning, along other apps I did for it, in
http://www.nongnu.org/onhandpc-kit/ ; you can see screenshots in
http://www.pconhand.com/software.asp ).
Really, those watches have a lot of "frame" around the screen. If the watch was only the visible screen without frame, it would be of normal size. Imagine one of those with e-ink :-o...
P.D.: The alternative was the fossil wristpda, also shown, but it flopped (battery problem, I think). The OnHand lasted on batteries about 1.5 months (or 3 if you put the "blank screensaver"), but the WristPDA had rechargeable batteries that lasted only days...