Seems I'm not the only one!Great to find this thread (even though the issue is not great)!
I just posted my battery swelling incident here:
https://forums.macrumors.com/threads/apple-watch-–-battery-swelling-inside.2040611/
I hope you get more luck with Apple, I gave up the battle and resorted in repairing it myself.
Here's a photo of the size difference between my expanded battery and the new battery.
Very clear to see why the screen did come off.
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My nearest apple retail store is a good distance from me and after not having success with numerous contacts with apple support, I felt it would probably result in a wasted journey.You've stated that Apple quoted you a charge, but this is obviously a manufacturing defect. Apple has been known to replace out of warranty phones and the like that have suffered from swollen batteries. Have you actually tried taking it into an Apple Retail Store?
I did send my photos of the battery defect to apple support but probably saw it as I had removed the screen and tampered with it instead of taking my word for it that I found it popped off. I just got quoted the £206 service fee everytime and from what I've learnt for a series 0 original watch is ridiculous.
I've resulted in repairing the watch myself.