I have successfully swapped a S2 Display onto a S3 Watch.
I removed the Light Sensor / NFC Module from the damaged S3 Display and attached it to a working S2 Display. I used conductive ink to make electrical connection to the two antenna points under the module, and superglue to mechanically attach the Module. Next I reflashed the Watch firmware using a (non-Apple) hardware device similar to the one used at the Apple Genius Bar.
I verified NFC functionality by setting up Apple Pay on the Watch, double-tapping the Side Button to activate Apple Pay as though I were about to make a purchase, and reading the "tag" data with an app called "CardTest" on an Android phone.
The repair is a little bit fiddly but doable.