I've got the same problem on Windows 8 not recognising my device. The suggestion is to pull down the notification Bar (I assume that's on the Watch, from the top of the screen). In my case I get the phone provider on the screen, and at the top of the screen, options to go to the time menu or top right more settings. If I go top right and select the settings, I can turn stuff on and off like WIFI, GPS, etc but I don't see anything to change the USB connection options. Am I looking in the wrong place?
If it helps, I'm using a 1/8 EU version with out any modifications (other than a few things downloaded via WIFI)