Is this the right way to connect to 8051

Yes, It is a right way to connect DS1232 to 8051.

In this case /ST is fed by P3.4 and the program running in micro should keep feeding this pin regularly so that the WDT doesn't time-out.

But again when you are programming your micro [ P89V51RD2 ] through ISP there is no program running on micro and no way to pulse P3.4 to feed the dog. and certainly it will bite your micro before ISP can complete and your micro will keep resetting again and again.

The easiest way to get rid of this problem is to feed the /ST with ALE that is as good as not using the WDT of 1232. In this case most probably you will use the WDT built inside your micro. Anyways when you are not using WDT inside your 1232 then why use a supervisor with WDT why not use a smaller and simple supervisor with no WDT such as MAX812.

Regards,
Prahlad Purohit