iPhone 11 Pro IOS 14.7.1 - Unlock with with Watch ON
WatchOS 7.5 - unlocking phone using Face ID, no swipe, unlocks watch quickly.
WatchOS 7.6.1 - unlocking phone using Face ID, must swipe up before watch will unlock - slow and somewhat unreliable.
Turn off unlocking phone with watch allows WatchOS 7.6.1 to revert to the behavior of WatchOS 7.5.
Conclusion - it's either a bug or a new security feature in WatchOS 7.6/7.6.1 to require the swipe up after unlocking the phone to unlock the watch when Unlock with Watch (mask setting) is set to ON.
WatchOS 7.5 - unlocking phone using Face ID, no swipe, unlocks watch quickly.
WatchOS 7.6.1 - unlocking phone using Face ID, must swipe up before watch will unlock - slow and somewhat unreliable.
Turn off unlocking phone with watch allows WatchOS 7.6.1 to revert to the behavior of WatchOS 7.5.
Conclusion - it's either a bug or a new security feature in WatchOS 7.6/7.6.1 to require the swipe up after unlocking the phone to unlock the watch when Unlock with Watch (mask setting) is set to ON.