What is exactly is your threshold for when a product should be created? That it does everything? That everyone likes it? Apple will sell METRIC SHITLOADS of these and do just fine, thankyouverymuch.
MOST Apple products are a little overpriced and underspecced upon release. Look at the original iPod -- it was indeed expensive, had no wireless, and "less space than a Nomad." Then it TOOK OVER THE WORLD. The MacBook Air was a little slow and $1699 or $1799 at launch, and then OH LOOK, the WHOLE PC INDUSTRY tried to copy it with the whole "ultrabook" thing, and by the way Airs start at $899 now.
So yeah, the first batch will be sold to people who are willing to spend $349 to see texts without digging out their phone. Then they'll get cheaper, more powerful, and more useful over the next few years. There is LOTS that could be done here. Maybe they'll create the pico-SIM and you'll be able to use it without your phone, and they'll push telcos into supporting it for free since it uses so little data. Etc etc etc. THIS IS JUST REV ONE. Stay tuned. And if you don't like it, don't buy it. Get a pebble or a moto or a samsung or whatever. Or don't. Apple will do just fine without you.
And finally, "a gigantic set of the population" DOES still wear watches. Apple became the most valuable company in the world JUST A FEW YEARS after introducing the iPhone, the original target of which (as announced by Steve Jobs at MWSF, January 2007) was just 1% of the phone market. A product at which Steve Ballmer famously laughed. Don't worry about Apple. They'll do OK with 1% of the watch market, too.