Hi - I think his name might have been shortened at some stage. There were very few Watsons in the IOM at that time, but many Wattersons. The IGI has an extracted entry (from the parish register) for Edward Watterson bapt 3 Oct.1831 Saint Marys, Castletown, Isle Of Man, Father: WILLIAM WATTERSON Mother: ELIZTH

There are these extracted bapts for the children of William Watterson & Elizabeth:
ELIZABETH WATTERSON Christening: 23 SEP 1827 Kirk Rushen [mother COMISH]
THOMAS WATTERSON Christening: 01 MAY 1826 Kirk Rushen [mother GARRETT]
EDWARD WATTERSON Christening: 03 OCT 1831 Saint Marys, Castletown [no mother's surname]
WILLIAM WATERSON Christening: 24 JUL 1826 Saint Marys, Castletown [no mother's surname]
SAMUEL WATERSON Christening: 17 JUL 1828 Saint Marys, Castletown [no mother's surname]

There is a copy of the St Marys Castletown [Malew] parish register available on LDS film no.0106714 [1807 - 1859] available worldwide through their Family History Centres (see local phone book under "Church of Jesus Christ of Latter-Day Saints") which would be worth looking at to see whether it gives any more information.

I had trouble finding the family in a census - in 1841 Edward is living with a Watterson family in Rushen, but separated on the list by a single "/" (a double // means the end of a household). No relationships are given in 1841, but I assume he was related to them - perhaps his uncle? John Watterson aged 40, fisherman (adult ages rounded), Ann 35, Jane 11, Ann 7, Margret 4, Thomas 1, all b. IOM. Then Edward Watterson 9 b.IOM.

Brian Lawson's burial index has two possible Elizabeth Watterson burials:
WATTERSON, Elizabeth 30 Malew 11 Sep 1832
WATTERSON, Elizabeth 25 Malew 16 Oct 1832
www.iomfhs.im/lawsons/LawsonBMD/burials/w_index.html

There are two William Watterson wills which would be a huge help to you if one of them is for Edward's father:
WATTERSON, William, 1837, Malew, E[pis], [no.]1, [LDS film number] 0106437
WATTERSON, William 1838 Rushen E 2 0106438

Family History Centres usually allow you to order several films at a time, and the more research you do before you go to the IOM the easier it will be for you to discover more when you get there.

Sue