Howdy Glip,
Yup. Watcher's Keep, IMHO, is simply a classic dungeon crawl. It doesn't seem to be related to the rest of ToB in any way except for one. That is that you find many of the parts of ToB upgradeable items in Watcher's Keep. I wanted to do Watcher's Keep right away (I'm in there right now...immediately after Saradush) so that I could use some of the cool items throughout the game.
There is a bit of a plotline/story to Watcher's Keep, but it isn't tied in with the main storyline. It is a lot of fun though! My party is averaging between 17 - 20th level (single class characters) and I'm blowing through it fairly quickly...although it is still challenging!
Hope that helps!
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Now where did I leave that doughnut?!