I believe the "lastViewedAt" field in the XML is what controls that. The script would update any items in your watchlist and set a "lastViewedAt" date. This would happen locally and could be run on demand maybe?
Not sure if this is a feasible idea, but figured I'd share! I just hate having to go to a different section and scroll through a wall of items to see my watchlist. I prefer the Netflix-style method (and Continue Watching style) where it's just a horizontally scrolling section