Thanks for experimenting here. I tend to think this is an Apple bug as you really don't directly control a Picker's presentation or dismissal, so it is hard to coordinate its lifecycle with other presentations like Sheets. But I think your trick of conditionally including the Picker in the view tree is a clever work-around to avoid this bug.
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I am updating it on the main thread but thanks for the suggestion.
See the screenshot of the error below. Is this what you mean by selecting the watch simulator as a run destination? The only way I can get previews to build is by removing the iOS target from the watch scheme in the description.