From my experience, it seems how strictly the rules are followed depends on the testing center and proctor you wind up with. My proctor didn't care about digital watches, but that could be different elsewhere.
I agree with AkamaiBrah and others that having a watch of any kind is a distraction. You don't need it for measuring time because you have a clock on the computer screen ... which is the official time any way. You will be tempted to look back and forth at your watch which will freak you out even more. As for having a good idea about time splits, if you practice being aware of time when you take the practice tests at home (Power Prep, etc.), then you shouldn't have a problem figuring out time splits with the official clock (see BB's advice on timing elsewhere on this site).