I get what you're saying, but I'm not sure it applies in the same way. The market demand for a Watch that acts independently of an iPhone entirely isn't even remotely close to the one that killed the iPod. Sure, I want one, but I know I'm part of a very small minority, I think the majority of owners by a huge margin who feel that way are going to get a Cellular Series 3 and be completely satisfied.
The reality of the market is that either you kill your cash cow (with a hopefully bigger cash cow) or someone else will do it for you.