[elfling]

I think the orcs would have flooded the area themselves not the dwarves, to block them in as others have said. I also beleive the Watcher to be like the Balrog but not the Balrog. just something ancient and evil that lived deep in the mines or below them and appeared after the flooding, as a sentry. Of course the Dwarves may have known of the Watcher from earlier in their history of Moria but it played a new role in the last battle with the orcs. I feel it was on no side inparticular just an evil being.