Upon popular demand, here’s the app which lets you compose and send SMS right from your SmartWatch!
Compose message using a T9-like keyboard. Send to an existing contact in your address book, or directly input the recipient’s number.
INSTRUCTIONS:
====================Step 1: Write the message
————————————————————————Swipe RIGHT to input SPACE
Swipe LEFT to DELETE
Swipe UP to enter CAPS
Swipe DOWN to switch between keyboards.When done writing, LONG TAP the blue area to confirm the message contents.
Step 2: Select the recipient from your contact list, or directly enter the number
———————————————————————————————————Swipe LEFT: to delete the last typed number or character
Swipe RIGHT: to delete all
Swipe UP / DOWN: to switch to T9 search
Swipe UP / DOWN: to list through the search results in T9 modeLONG TAP on the green area to confirm the selection / input.

Do you need a smartphone or can you use a nexus 7 with the smartwatch?
You can use any Bluetooth enabled Android device on which you can install the Sony SmartConnect (LiveWare Manager): https://play.google.com/store/apps/details?id=com.sonyericsson.extras.liveware
I assume the Nexus 7 fits in this category. Check if you can install the LiveWare manager (link above). If it works – than you’re fine. You can also check Sony’s site for details: http://www.sonymobile.com/