I am having the same problem with my install and the files are where they should be.
I am using 1.5 with legacy enabled. When I receive the error I see that the directory path defined in visits.php & stats.php omits several "/" characters in the directory path resulting in the error . This might be because I have several urls hosted under the same account and this install is not the main domain....
/includes/defines.php): failed to open stream: No such file or directory in /home/content/m/y/s/MAINDOMAIN/html/_SUBDOMAIN/
components/com_joomlawatch/stats.php on line 31
Sounds like a great plug - in would love to get fix on this. I can do great QA but not so great with code - so please help