It did, as did MKC. They basically swapped calls every other hour on the main services, and it worked.
MKC fortunately got its extra platform to enable a better service, Watford is of course more hemmed in. And the demand was definitely there - it was known as an intercity station for miles around - as the outer railhead for the WCML - but that has probably been degraded for newer generations.
But it could be again, post HS2 potentially. Even just an hourly Manchester call (Crewe) would be a huge upgrade.
Bit in bold - post HS2 though I can't see that demand returning even if you did provide stops at Watford on Birmingham / North West services.
If you live on the M4 /M40 (Slough, Denham, Wycome) corridor there will almost certainly be direct services to Old Oak Common which will be about 45 mins to Birmingham given HS2 are quoting a 49 minute London - Birmingham journey time, compared to a 1h 20m, 3 stop on Avanti. A Watford service would have *at least* 3 stops because it won't run fast through Coventry or International and would probably stop at MK or Rugby as well).
Even on the M1 corridor, only Hemel looks more attractive with a via Watford journey. For St Albans a fast Thameslink only takes 20 mins to St Pancras add 10 mins to get to Euston - that's the same time driving St Albans to Watforf would be (looking at Google Maps right now) and the HS2 journey would be faster than Watford - Birmingham WCML.
Luton - easier to drive to MKC.
Welwyn / Hatfield - fast train to Kings Cross 29 mins (Welwyn GC) plus 10 mins to Euston compared to ~45 mins just to Watford - again a faster HS2 journey will make that the quicker route.