Explain how Watson's habit of embellishing both helps and hinders a reader's attempt to solve the mystery before Holmes does.
I do not believe that all the readers of the Sherlock Holmes stories and novels are attempting to solve the mystery before Holmes does. Some readers are intrigued by the settings, the costumes, the dialogue, the elements of danger and adventure, and the different characters who existed in Victorian times and who often seem so strange to us now. Holmes is featured as a genius at logic and deduction, but the stories would become pretty routine if they were only intellectual puzzles. Doyle knew that readers wanted excitement. This is provided mainly by Watson's "embellishments." Holmes provides the brain work; Watson provides the excitement. Watson does not seem to interfere with his friends brain work; rather he often seems to be assisting him in it by asking him all sorts of questions. This interchange between the two friends helps the reader to understand a little of what Sherlock Holmes is thinking. So in this respect Watson's input can be of help to those readers who are trying to solve the mystery before Holmes does. It is probably pretty rare that a reader is successful in actually doing so because Holmes generally keeps gathering facts throughout the story. He method often seems more inductive than deductive.
If you've ever seen the Sherlock Holmes movies you'll notice a stark contrast between Robert Downey Jr.'s portrayal and the Detective on display in the books. In the books we have Watson describing a man he admires, an account colored by Watson's astonishment at Sherlock's genius.
In some ways this offers us deeper insight into Sherlock's methods. Often Watson compares his reasoning to the superior intelligence of Holmes. This allows the reader to understand the brilliance, and points us in the right direction.
But Watson's fawning over his friend's keen intellect often distracts the reader from key facts which are included within the narrative, and sometimes the facts are omitted in the interest of keeping the readers' attention on the Detective solving the mystery.