Brian, you yourself sent this information to me via a friend from another chat board. The questions you had raised were...

Catherine W would appear to be a daughter and Margaret W a grand daughter.
Is Margaret, 25, the wife of William 35
Who do the children Elizabeth, Catherine, Margaret & Jane belong to.
Catherine & Margaret would appear to have different parents as only one was
born in England.
However, if their ages were recorded in 5 year blocks the either or both
could be as old as 9. This would be very unusual for children.
I would not be surprised to find Margaret was the illegitimate child of
Margaret.

Catherine 35 is a daughter, she married Thomas Watterson in 1830 and their daughter Margaret was born 1833 Rushen IOM. Margaret 25 could be either William's wife or another daughter of William and Margaret as there was a Margaret born 1816 to the family. I found a possibility for Jane 2 as the daughter of the son William and his wife Margaret. There is also a son John who had a daughter Catherine around the age of the one in this census. I cant find the other girls.
Thanks for the help so far.