A bit of investigation with Dr. Google found that the beagleboard XM boards have a known issue with the omap_wdt driver. Instead of rebooting the board it holds it in reset.  The easy solution is to not use the omap_wdt watchdog timer driver but rather the TLW4030 watchdog timer driver.  Looking at the latest pickle Linux kernel I see there are currently 4 watchdog timer drivers built into the kernel including the working TLW4030. Since it loads after the omap_wdt timer it doesn't get used.  The TLW4030 reportedly works on all version of the beagleboard.

lib/modules/2.6.33-500-omap/kernel/drivers/watchdog/softdog.ko
lib/modules/2.6.33-500-omap/kernel/drivers/watchdog/twl4030_wdt.ko
lib/modules/2.6.33-500-omap/kernel/drivers/watchdog/omap_wdt.ko
lib/modules/2.6.33-500-omap/kernel/drivers/watchdog/pcwd_usb.ko

Therefore would it be possible to get pickle rebuilt without the omap_wdt built in?  That should then cause the twl4030 driver to be used whenever the /dev/watchdog file is written to and hopefully solve the problem.  Anyone wanting to use the timer would still need to install the watchdog user space program as I don't think it makes sense to include that in pickle.

A quick way to test the watchdog timer is to just cat /dev/watchdog and wait a minute. Current XM boards with the omap_wdt timer will crash after a minute.  Newer beagleboards will restart. If my theory is correct after removing the omap_wdt driver all boards will restart

Thanks
Mike