Yeah, it definitely wasn't as impressive as it seemed on the surface. A much better test of Watson's performance would have been QuizBowl, where contestants can buzz in while the question is still being read.
They also did some other tricks, like giving Watson a parsed ASCII stream of the clue, rather than making it see the screen and parse it out. I think it also got an electronic feed of the "you can buzz in now signal" rather than making it parse out the same light the contestants see.
Also, the ASCII feed should have matched human reading speed.