my gut is that Watkins is a top 10 WR. Right now, he is looking like a top 50 WR though.
I think your idea on treading water with a contract where the big bonuses kick in for Year 2 or Year 3 would be perfect to give it more time.
I don't know the deal, but he does seem a little slower. Maybe his foot is a problem. He has had a few concentration lapses that were missed big plays that turned negative.
I do know lots of photos and videos showing he is open many times and not getting the looks. That I do not understand. I also wonder about his mental ability coming in late and picking up the specifics of the offense.
Maybe better health and more time in the offense and better chemistry with Goff will open the door next year. I hate to give up on a guy that potentially is a superstar without taking another look.