Does WATCHOUT support interlaced output?

No, all versions of WATCHOUT only supports progressive output.

Interlaced output is not supported by any version of WATCHOUT, or by any WATCHOUT display server.  

For progressive outputs other than the default 60 frames per second (60p), such as the commonly used 1080p30 or 2160p30, set the frame rate in both the operating system AND in the show file (File-> Preferences -> General).

Acceptable range is 15p – 240p, assuming the graphics sub-system and the connected display support the desired refresh rate.