Updated to the new version of Android Wear this morning, and just tried out Theater mode...and it was exactly what I was hoping it would be when I saw the announced features yesterday. It disables touch input, turns off the screen, and requires you to press the hardware button to turn it back on.

I asked for this back in September on G+...

This will be great for my bike rides....I will no longer need to use a screenlocker when riding, and my sleeve won't activate the touch screen anymore. Yay!

For those who have it and are wondering, access it by swiping down to get the settings menu....then swipe left to get theater mode, sunlight mode, and then settings.