It's remarkably insulting to the 1st century Christians, I agree, but I think the Watchtower's take on this and other things that seem to suggest a physical resurrection is that it would confuse the early Christians. If he was raised up as a spirit creature, but his body was left there, it would be a hard case to make that he'd been raised at all. The linen lying folded would just be part of the "make 'em think he rose" ruse.
Don't they even say that Jesus' body was probably dealt with in the same way that Moses' body was? That seems familiar to me.
How do you answer the Watchtower's arguments AGAINST physical resurrection? Like the one where he's walking on the road talking with his disciples, but they don't recognize him?
And why was he physically resurrected with holes in his hands? That one doesn't make sense to me.
Dave