I am seeing what appears to be the same issue. I have an iPad Pro 12.9" 2020 (4th Gen) The installation of iPad OS 17.3 cause the pencil to stop connecting and was no longer recognised. (Although snapping it to the case, still gets the Pencil notification) None of the usual remedies work. Restarting, resetting network settings, unpairing/repairing. Tried them all. Bluetooth will not connect to the pencil at all. This is a brand-new 2nd Gen Pencil - with a matte finish and was working prior to 17.3 This is where it gets weird... I also happen to have a (slightly damaged) older 2nd Gen Pencil - this seemingly identical pencil has a slightly smoother finish and was bought in 2020. The older pencil continues to work fine. But the new pencil is unrecognised. This makes me think the OS update included the support for one version of the pencil but not the more recent. I just installed the iPad OS 17.4 Beta to see if this would resolve the issue. (21E5184i) It did not.