JTP,
That's the "official" reason why they named it that, but I found something else that's a bit disturbing.
It has to do with CT Russell. In addition to dabbling with pyramids, he also is known to have dabbled in Enochian magic.
Here is an excerpt of what I found at this site regarding this subject:
http://www.supertarot.co.uk/magic/enoch.htm
The Enochian System of Magick, the Spiritual and Magickal Pinnacle
of the Hermetic Order of the Golden Dawn, has three main areas:
the 30 Aethyrs, the 91 Governors and the 4 Watchtowers.
Most reference books show the Aethyrs and Governors in sequential order,
as given by John Dee, skating over the fact that there are exactly 22 Governors
in each Watchtower (leaving two squares over that are added together to produce
a 92nd Governor, who is considered to be evil).
There have also been attempts to use other occult models such as the
Tree of Life (Pat Zalewski), or the Gupta-Vidya model (Schueler).
They have some use, but there are also problems with them.
The Keys to understanding the Powers of the Tarot are scattered amongst various publications:
There are supposedly 4 Watchtowers which play a prominent role in this realm of belief.
Could the name "Watchtower" have originated with Russell's involvement with this type of thing?