Ran into the issue again just now. Filed a feedback report FB16000502
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Thanks for the insight, last night I was facing this issue and indeed it was extremely frustrating.
Closing xcode did not help "reset" anything. However, turning off the Mac did work.
Next time I am in the middle of a dev session and my watch refuses to connect, I will grab logs as you have guided.
FWIW, I do triage work for the other side... Dealing with these kind of intermittent failures is quite a nightmare in the triage world.
Also, AFAIK, there are no exact repro steps.... Something goes stale and connections are refused.
By reset, I mean the problem went away automagically.
Tuning off/on the watch doesnt reset
Tuning off/on xcode doesnt reset
Turning off Mac did reset (M1 Air 2020)