with Bluetooth can you connect both iWatch 3 and a headset to your iPhone

Your watch will connect to the iPhone automatically. You can also connect bluetooth headphones to your phone at the same time.

If you use AirPods you can control volume, track etc through your watch. It’s brilliant!

I don’t know about Beats headphones but non Apple headphones will almost certainly have no control through the watch.

Hi

Yes, you can.

To pair and set up Apple Watch, follow the instructions here (this is not done via Settings > Bluetooth on your iPhone):

Set up your Apple Watch - Apple Support

To pair other Bluetooth accessories to your iPhone, including headphones, follow the instructions here:

Pair a third-party Bluetooth accessory with your iPhone, iPad, or iPod touch - Apple Support

Most - but not all - Bluetooth headphones that use the A2DP Bluetooth profile can also be used directly with Apple Watch for listening to music from it, potentially including when you are away from the paired iPhone:

• Listen to music on your Apple Watch - Apple Support
• Add music to Apple Watch
• Play music
• Radio (Apple Watch Series 3 only)
• Use Bluetooth accessories with Apple Watch - Apple Support
• How to use your Apple Watch without your iPhone nearby - Apple Support

Apple does not publish a list of compatible headphones for Apple Watch. Headphones that are least likely to be compatible are those that also offer additional built-in functions such as fitness tracking, a heart rate monitor and/or a built-in media player. For any such headphones, I suggest that you check with the manufacturer before making a purchase.

You may wish to consider buying AirPods, Beats X, Powerbeats3 or other Apple / Beats products that are able to connect to both your iPhone and your Apple Watch at the same time, switching between them automatically as and when required.

For example, in the US:

• Headphones & Speakers - Watch Accessories - Apple
• AirPods - Apple
• Buy BeatsX In-Ear Headphones - Apple
• Powerbeats3 Wireless Earphones - Neighborhood Collection - Brick Red - Apple