Bay's Chris Bell capitalised on a defensive lapse to beat Watson and put the Seahorses ahead in the 23rd minute.
But Sam Thompson levelled things up in the 52nd minute, then added his second to put the Villagers on top.
Watson was finally beaten again in the 76th minute as Paul Dunn fired a free kick from outside the box beyond his reach.
But leaders Blyth Town are now eight points ahead, having played two games more, as Zak Atkinson struck twice at his former club Rutherford and David Atkinson and Scott Pocklington added the others for the Northern League-bound South Newsham side.
Scott Brotherwick and Lee Gustard netted for Seaton Delaval in their victory at Walker Central, with the Red Devil's keeper also pulling off a penalty save in a good game.
Hebburn Reyrolle beat Bohemians 4-2 in Division One.