Yes, I heard him at Comic Con say that it was a small light covered by an orange gel.
As in the story, it is just there to move the story along. In th eoriginal screen play, it was supposed to be diamonds, but when shooting, QT thought that was too dumb, and changed it to the light.
I don't think that he thought it was going to be such an issue, but it has been. In the end, I like the explanation that it is what you want it to be. Meaning: Who ever looks into the case, sees what they want it to be. Travolta looks into the case and sees drugs, because that's what he wants it to be. Honey-Bunny looks into the cast and sees wealth, because that is what he wants.
The watch is more of a McGuffin than the case. The watch is the McGuffin for the whole movie