The qualifications you're making to the TSA's actions are a little bit generous aren't they? Given that a regular agent can't tell the difference between that cartoon contraption and an actual dangerous device, what's the point of having them in the first place? If all they can do is flag up anything that looks vaguely electronic and unusual, then they are completely useless.
Besides which, in this case they managed to determine that the watch didn't have any explosives attached, but they still arrested the guy anyway.
1) If he wanted to provoke in the name of art, then it didn't cost him, he managed to achieve his objectives.
2) Being able to smuggle a watch through security at an airport wouldn't be grounds for much celebration.
3) What kind of bears have horns?
4) We don't know the full details (the official story could be wildly exaggerated), but if the TSA over-reacted then it doesn't really matter what the intentions of the artist were. If the artist was just a dude with a strange watch or if he was trying to show us the limits of our freedoms, our freedoms are still limited.
Besides which, in this case they managed to determine that the watch didn't have any explosives attached, but they still arrested the guy anyway.