When I started this project, I did not know how to surface mount solder.  This greatly limited the form factor of the watch itself.  The only way I could think of mounting a 40 pin MC was to do something like this:

Now however that I know how to surface mount solder, and parallax makes the propeller as a QFP (

http://www.parallax.com/product/p8x32a-q44), this is no longer a limitation.  The current plans are as follows:

I do like the look of the leather band, so I decieded to keep it.  The watch may be a little thicker than I'd like, but I think I will be able to fit everything inside the case once its completed.  I also hope to get a circuit pattern etched into the band with a leather burning tool once the project is complete.