You can verify the watchdog reset with a scope, the 668 reset works as an output when the puppy bites. If you are using a supervisor with totem pole output, this may be your problem. I honestly do not know if the 668 resets on a watchdog bite if the reset pin is held. With all of this being CMOS, just insert a 2k2 resistor between your supervisor output and the 668 reset pin.

Erik