I don’t think the DPI is important. That’s really only relevant for using an image where inches are used (such as importing images into a CAD drawing). The watch face is 360 x 360, so ideally that’s the image size you want to import.
If you’ve got a larger image you want to use, you can resize it using an external image editor (such as Photoshop) before importing it. However, you can also resize the image using GWS, so it’s not necessary to resize it externally, but if you resize it before importing it, you can be certain what it’s going to look like.
You can also import images other than PNG. If you import a JPG, for example, GWS will save a copy of the image as a PNG and use that in your design (it’s interesting to note that GWS saves the PNG image without a DPI value assigned).
As an example, I used a 1080x2220 JPG in my last design, and I resized it to 360x740 in GWS, and rotated it by 10 degrees to get it just how I wanted it.