The biggest design problem with the Watchman is that Signals do not form their own archetype. The most popular Signals -- Dúnedain Warning, Dúnedain Mark, and Dúnedain Remedy -- are mostly used as splashable support attachments to flexibly patch needed weaknesses of any deck running leadership. There is little purpose in building a deck with the sole purpose of putting out a ton of Signals, as there is no overall synergy to these cards. At the same time, for most decks that use Signals, they are helpful to have, but not critical in the way that linchpin attachments like, for example, Vilya, Steward of Gondor, O Lórien!, or King of Dale. Those attachments merit including many ways to specifically get them on turn 1. The same is just generally not true of Signals, so the Watchman's fetch ability is helpful but not terribly valuable on its own.
Given that his ability alone cannot justify his inclusion, the Watchman needs to have strong utility in stats or traits. Unfortunately, neither is really the case. On stats, he's got a moderately useful 1 and can soak a point of archery. He can also chump, but likely won't be available to do that because he's questing. His traits, however, are where he really falls flat. He simply just doesn't fit in with the Dunedain archetype at all. His best utility would actually be in a Gondor swarm deck... if he had the Gondor trait. You could see playing the Watchman with Herald of Anórien, for example, to get an early Dúnedain Warning out on Denethor and set up A Very Good Tale search for Faramir. The Watchman would be decent with the Visionary Leadership boost, especially. But he's not Gondor, he's Dunedain. Unlike Signals, therefore, the Watchman is just not splashable and so doesn't really find his way into that many decks. As others have pointed out, he simply does too little for too much cost to justify inclusion in today's very competitive card pool.