I don't think it is a mistake for the following reasons. First, there is plenty of film on him out there; thus, his strengths and weaknesses are no secrets to scouts. I doubt he will be able to make corrections for his weaknesses that quick, so I don't think participating in the Senior Bowl would raise his draft stock. Further, if he doesn't play there is no opportunity for him to do poorly; not saying it would hurt his draft stock (see above comment about how scouts already know him). Second, I just think that its an unnecessary injury risk; one less opportunity to suffer an injury right before you are due to sign a contract to make millions of dollars. Third, I'm sure he will hire a QB coach, and maybe even a few other kinds of trainers, in an attempt to better prepare himself for his pro day, some of the combine possibly, and the NFL in general. Not participating in the Senior Bowl allows him to jump right into that one on one individualized training. I know there are coaches (HCs and position coaches) at the Senior Bowl, but he would not get the one on one attention that he would get with someone he hires to help him out.
All in all, I think the risks of playing in the Senior Bowl greatly outweigh benefits he would get from participating in it. I feel like the Senior Bowl is typically a place for lower profile talented players to showcase their abilities. I'm not saying lesser talent, but someone who has not had as much exposure as Watson. Just my $0.02 though.