Correct. If you roll back your phone, you won't be able to use the watch. watchOS 27 requires iOS 27. Also, you won't be able to restore any backups that were made with iOS 27. You can restore a backup that was made with iOS 26 if you happened to do that before you upgraded.
Maybe, maybe not... That info is stored on Apple's servers. It doesn't matter that you don't own the phone anymore anyway. It's asking you for the passcode that you used on that iPhone so it can access/decrypt your iCloud Keychain. After so many failed attempts, it should be asking you if you want to reset your keychain and start with a new one. (Your old keychain will be lost.) It's possible that iOS 26 will give you that option.