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I wonder if the bezel allows for a normal square display underneath?

It should fit. Here's a fast and dirty mockup: https://i.imgur.com/eC1Yjgi.png

Internal Pebble developer on their Slack said it's a round LCD under the bezel, not a masked-off square one.

The Nest thermostat also had a square screen under a cover that makes it look round. (Not sure if newer Nest models actually have circle screens.)

i believe the new third gen that was just released a couple weeks ago is the first Nest to actually use a round screen.

That was my first thought. The bezel definitely looks nearly exactly the right size for that.

On the other hand, the Apple watch is also nearly 45% bezel: http://cdn.arstechnica.net/wp-content/uploads/2014/09/apple-... though it somehow looks slightly smaller with the square glass.

I honestly prefer it that way. Looks better and more classic compared to for example Moto 360 IMO.