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The question is, are you ok with the encryption being breakable if it makes your watch faster?

Personally, if I'm ok with the encryption being breakable, I'm also ok with not using any encryption at all. I can't imagine a scenario where I would want weak encryption.

Anyway, the way to solve that problem is to get a CPU with AES instructions.

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That tradeoff doesn't exist. No one is proposing weak or breakable encryption. Even the fastest "lightweight" finalists provide full 128-bit security.

If they have 128-bit security, what is the difference between that and a normal contest?

I think the difference is that the focus is on finding more efficient ways to provide the same level of security. Existing algorithms are "good enough" performance-wise for mainstream hardware, but there is much room for improvement without tradeoffs.

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