Unfortunately every member of the TSA cannot be an expert in this man's artwork to understand what he actually had in his posession. Suspicious watches (and protruding wires!) are one of the things they are trained to look for as all of the 9/11 hijackers had digital casio wrist watches. So yeah, honestly I think confiscating the watch and stopping him was a good move. Maybe even denying him his flight would be sane.
What does it take for you guys to agree that someone shouldn't get on a plane, a backpack full of c4!? The idea is to stop the disaster before it happens, and at this point all we have are vague clues. Not to mention the fact that for economic reasons, each TSA officer is going to be a layman who probably isn't well versed in electronics.
Combine this with the fact that it looked like he "hid" it under his coat... This guy needs to use some discretion when flying, I'm sorry!
As much as I disagree with the erosion of our civil liberties, wearing a watch that looks like a bomb detonator onto a plane is not a smart move. Sure, us HNers would know the difference between art and a real device. The general public does not, and we cannot expect them all to gain our same level of competence with electronics.
Finally, the TSA stopped someone that was actually suspicious.