I have being dealing with the same issue on my Apple watch. Actually, i closely monitored the Update process after clicking Update now. Just for a fraction of time I saw a Pop up Window asking for access permission to update, the main issue is that just after a second, without even giving time to click on update, the Update process starts and in sometime you see the Unable to update error with no Internet! Then Infinite loop fun starts... I somehow managed to click on Update Button in above-mentioned permisson window before the Infinite loop starts in. Worked like charm.