G'day Michael,
I reckon an altimeter is one of the most useful navigational tools you take with you out in the mountains.
I use it all the time when walking. It allows you to navigate in three dimensions: much more accurate than map coordinates alone. It narrows down your error range allowing you to pinpoint your position with much greater accuracy.
I have a Suunto Vector watch and you do get used to the bulky size of them. I now wear it all the time as I've come to prefer it to my analogue Seiko.
I would never rely on the watch's digital compass as my primary navgational tool. I always take my old trusty Silva compass on every walk I do and do all my navigation with it. However, having the digi compass on my watch provides me with an effective backup (for no extra weight)in case I were to lose the Silva.
This happened to me once. I foolishly left the compass in my pocket with the cord hanging out and it snagged on some scrub and was pulled out of my pocket. I was in thick scrub and I couldn't find it anywhere despite a frantic search. I was forced to rely on the digi compass on my watch which was OK but no where near as convenient as using the analogue Silva. Unbelievably, a few days later, on my return trip, I spotted the compass hanging from a branch. The scrub was so thick that if I had been even a metre further away I would never have seen it!
So my advice is for a watch. In addition to the altimeter and compass, mine has a thermometer, alarms, timers and a barometer (it even tells the time!). But the killer app is the altimeter.
Andy.