I just resolved a problem that I had with my watch notifications and unlocking that went on for nearly a week. It actually started when I bought one of the new iPods and set it up, although that may just be a coincidence.
My watch would not do any notifications, and it would not unlock when the phone was open even though it was set to do so.
I tried all of the various fixes I had seen posted and none of them helped, as well power cycling the phone and watch did not help either. What worked was cycling the bluetooth on the phone, which is weird as I had thought that power cycling the phone would do that.