I've found an answer to my own question here. If anyone is interested, on close VLisp saves settings in the file C:\Documents and Settings\username\Application Data\Autodesk\AutoCAD 2006\R16.2\enu\vlide.dsk
If you exit acad and then open this file with notepad or similar, you can see a list of variables retained in the watch window. You can simply delete the trouble item and save the file. Upon reopening acad and VLisp, viola! No trouble item in the watch window. Hope this helps someone.
If there's a better/easier way to do this I'm still interested to hear.
Ryan.