Remember that w/kg is most useful when dealing with hills. If you're getting dropped on hills then there's simply no substitution for w/kg. When I started racing I was really skinny. I don't even know what I weighed for three years but I was 103 lbs in my fourth season. I won three races in quick succession between the fall of my third season and the spring of my fourth season. I also led out a teammate to a win and got 2nd in another race. All of those were in sprints. I thought that my form was good (that's how everyone talked about fitness levels) so I entered some road races. It was really embarrassing how poorly I raced. On the first climbs I popped in about a minute, maybe two.

(I will say that being lighter is easier. Accelerating 20 or 30 pounds less is better, even on a flat road. The only time much less weight is bad is descending. When I dropped about 40 lbs, between the winters of 2009 and 2010, I found that I couldn't descend well anymore. I had to sprint down hills to stay with guys that I'd normally drop on descents. On the other hand I found the short power hills to be much easier and I also found that accelerating out of corners, even on flat courses, to be somewhat effortless.)

Pure watts is important in time trials or flatter terrain. For example someone might be 100kg but put down 350w FTP, so 3.5 w/kg. Another rider might be 50kg but only put down 175w, giving the same w/kg but in flat terrain the 350w rider will have the advantage unless the 175w rider can shelter really well. This is why the big guys motor so well on the flats and then get shelled on the hills. Their mass wipes out a lot of their power, even if they have good power, but since they have good power they can motor. I've followed Cat 1s doing 500w for a couple minutes and then just blew up, even though I was drafting them. I simply couldn't sustain the power necessary to draft them. In those situations it's best to back off, let a bunch of riders get in front, and take shelter behind 20 or 30 riders instead of 1 rider.

Finally watt:aero-drag is significant for time trialing and sprinting. For example I read somewhere that Cavendish puts down in the 1600w range. Boonen in the 1800w range. Taylor Phinney has hit the 2400w range (something insane like that). However Cav is a smaller guy so he presents less to the wind than a Boonen. Also there's a pretty good national level time trial guy that puts down something like 290w for an hour. Through careful equipment choice and adjustment, using wind tunnel tests etc, he's still able to be a national level TT guy at that wattage. I think he can do 48 kph or something.

I'm little on the bike so I tend to have less drag. Guess which one is me?

(I got shelled in this race at 4 to go - the hill was just too much for me. Red Trolley, 2011, M35)

I'm not light anymore and it's obvious because I can usually descend significantly faster than other riders, like 5 or 10 mph faster at times. My smaller aero profile means that I can get away with less power. I have also learned how to save energy in a field so I do that. My races are usually very boring - I sit at the back and wait for the sprint. When I'm strong I start moving up between 7 and maybe 3 to go. If I'm not strong then I have to delay moving up because sitting near the front of the field takes an enormous amount of energy, even drafting and such. Here's a race where I wait until just before the last turn to move up, mainly due to the fact that I didn't trust my tires in the wet. I prayed the whole race that a break wouldn't go and luckily for me the field collectively decided to wait for the sprint.

Another race where I move up in the last minute of the race (I misjudged this one so it was unintentional but I was suffering super hard during the race). The guys I beat are significantly better than me in terms of fitness etc - one guy, Ed A, I raced with in college and he's won the Killington Stage Race (Cat 3s) and soloed to a few incredible RR wins where he won by minutes by himself which is just absolutely mind boggling. However he and the others rode a different race tactically. The guy that wins would win the Canadian National Cross championships (M35) and the guy that got second is a Cat 2.

In other races I'm closer to the front before the finish. However this costs me a lot of energy and a lot of times I'm done before the sprint. In the following race I'm constantly moving to the front, mainly out of fear, and in the end I pay the price for all my efforts. This is one of those races where I was redlined going into the sprint so I had nothing more to give. I was worried that when I stood I'm I'd just stop, it was that bad.
(I learned after the race that a bunch of my friends visited the hospital after the race - somehow I missed a bunch of crashes that happened while I was at or near the front, so I never saw my friends on the deck. My cornering issue was me being an idiot and putting low pressure in a tubular on a wide rim. Tubulars are rim-independent in terms of pressure, unlike a clincher, so I was running my tires 40 psi lower than I should have. Tubular wide rims are for aero; clincher wide rims are also for comfort/lower-pressure.)

Finally, a race where my teammates really worked hard for me. The guy that led me out at the end averaged 387w, which I thought pretty much impossible so I sort of wrote it off. I learned later he's an ex-pro mtb racer and he later got 3rd at Masters Nationals in cross, so he's a super strong racer. He worked his heart out for me. I averaged 200 watts less but I was the one that was supposed to deliver the goods. Even in the leadout, going 35 mph into a headwind, my heart rate dropped 5 bpm. I was resting and recovering at that speed because I was drafting well and I present less area to the wind.

What I find ironic is that I find races easier than group rides. Group rides inevitably go up hills. Since I suck at hills I struggle and often get shelled. Groups that wait are even worse because then I can get shelled over and over again. In a race you get one chance and then you're done.

Races also tend to be safer or at least more predictable than group rides. You can bail if you get uncomfortable. I've bailed in races, just moving to the back (if I'm not already there) and just staying there until the race finishes. It's easy to avoid things and you don't have to draft closely at the back. I'll sometimes be 30-40-50 feet off the back, on purpose. In other races where I don't get the heebie jeebies I'll move to the front and contest things. In group rides it's often a long and lonely ride back to the car if you decide to sit it out. If there's a bad crash, like a broken collarbone or worse, it could take a while to get help. Etc.