If your JIRA instance has a 'context path' part in the URL (something after the port), eg '/jira' in http://localhost:8090/jira, then clicking 'Unwatch' in the 'Watched issues' portlet redirects you to the wrong URL. The link to click on is something like:

http://localhost:8090/jira/secure/UserWatches.jspa?delWatch=10000&returnUrl=/jira/secure/Dashboard.jspa

and this redirects to:

http://localhost:8090/jira/jira/secure/Dashboard.jspa

(notice the duplicate '/jira').