There is one big problem with Smartwatches
A watch needs to be stylish and needs to fit to you.
Normal people would not wear a ipod nano as a watch all day long.
It does look silly, maybe apple saw that and change the nano back to its original form factor.
They could work on a standalone watch at the moment, no mp3 player / nor any headphone jack. Its just a watch that pairs to your iPhone.
That would make a lot more sense then making a iPod into a watch.
For a Smartwatch to be a mainstream success, it needs to look and feel like a normal watch with some special features, thats all.
There would be a need of different form-factors and maybe colors. (black / white and different band)
Geeks would wear a iPod nano watch, but not any "normal" person would.
Apple is after the normal People, not the Geeks.
Would your friends / family / grandparents where an iPod nano everyday ?
Maybe I am 100% wrong, we will see in 2 years from now :D
Sorry for my english, its late here and its not my main language.