In a 6- to 8-quart pan over high heat, bring 3 quarts water to a boil. Add beets, reduce heat to medium-high, cover, and cook for 10 minutes. Add potatoes to the beets, cover again,and cook until both are tender when pierced, about 10 minutes longer. Drain and let cool. Peel beets, then slice into 1/4-inch-thick half-moons.
Meanwhile, in a small bowl, whisk together the sour cream, mayonnaise, vinegar, onion, parsley, horseradish, and garlic. Season to taste with salt and pepper. Mix dressing into the potatoes.
Rinse watercress. Pick tender sprigs from tough stems and cut into 3- to 4-inch lengths. Arrange sprigs on a platter. Top with potatoes, then arrange beets over mixture. Sprinkle with crumbled bacon.