Q: How do you turn the passcode off?

My watch enables/disables the passcode just fine as does the Watch app on the iPhone. I think you should try restarting the watch and see if that clears the problem, if not try restarting the iPhone also: http://help.apple.com/watch/#/apd521a8a902

If that doesn't help then it's probably time to reset and repair the watch: http://help.apple.com/watch/#/apd4ad3571d9

I had a very similar problem, but my device was stuck with "Unlock with iPhone" on, and I couldn't actually set a password. Reseting my Watch and starting over didn't solve the problem. Weirdly, if I tried to create a new passcode that was four digits, I was told it needed to be at least 6, but when I tried a 6-digit passcode, I simply got no response -- it was neither accepted nor rejected.

Ultimately, I determined the cause was I had an Exchange account synced to my iPhone that enforced a 6-character passcode, where at least one of the characters had to be non-numeric. The Apple Watch doesn't support non-numeric passcodes, and so it seems there's a bug where it doesn't handle the situation well and also doesn't inform the user what's wrong.

Deleting the Exchange profile fixed the issue.

As I mentioned, I had the same problem, and I've now figured out a work-around.

The Problem: Can't create or change or disable passcode on the Watch.

The Cause: I realized that I had a Device Policy on my iPhone that required a 6 character password that contained at least one non-number. Since the Apple Watch can only support numeric passcodes, it was impossible to create a compliant passcode. Unfortunately, there's no error message from the Watch -- it just silently fails. This appears to be a Watch bug.

The Work-around: remove the Device Policy from your iPhone (you can test whether it's gone by trying to change your iPhone's passcode to a "Simple" 4-digit number), then set up the Passcode on your watch. After it's set up, you can re-install the Device Policy on your iPhone (by whatever means you originally installed it), and continue using the passcode on your Watch. Apple Pay will work. However, you'll be unable to change or turn off the passcode on your Watch.

You don't have to enter your passcode 100 times a day, you only need to enter it once, first thing in the morning when you put it on. As long as you don't take the watch off you never need to re-enter the passcode, even when using Apple Pay. You certainly don't need to enter it to see the time!

The idea with Apple Pay is that it must know you are the valid owner of the device when you buy something using it, on the phone you use your fingerprint to confirm, with the watch you already confirmed that you were the owner by entering the passcode when you put it on, as long as you haven't taken it off since then you don't have to do anything, no passcode required, when you use it with Apple Pay. Apple has already thought this through, thoroughly.

Have you tried restarting/resetting the watch? If that doesn't work, check if the watch can detect your heartbeat. Perhaps you are dead... ;-)

Um, you're putting it on a bare wrist aren't you, not over a sleeve, a bandage or something? It sounds like it's unable to detect that it's being worn for some reason (strap too loose?) If nothing works it may be faulty sensors, time to take it to an Apple store and get them to have a look at it.

Or perhaps you have ink?

http://appleinsider.com/articles/15/04/28/apple-watch-wrist-detection-failing-wi th-some-tattoos-users-complain

apple pay requires a passcode

disabling it should allow you to turn off the passcode

because the passcode is a major pain if you're trying to use the watch while you're not wearing it.

Reluctantly, I have disabled my passcode also, I found that when not wearing the watch I had to enter the passcode every 15 or 30 seconds!  If there was a way for the passcode to "stick" for 15 minutes or so, I would leave it enabled.

Settings > General > Wrist Detection = Off

Settings > General > Wrist Detection = Off

I don't have this.

I have:  Settings > General > Activate on Wrist Raise

I don't see how this would help the watch constantly asking for a password.  Besides, I want to watch to activate on wrist raise.

That option is on the Watch app on your iPhone. It is separate from Activate on Wrist Raise.

I had a similar problem not being able to select Disable Passcode. Also I do not have Apple Pay enabled.

It seems the Exchange server I was using was causing the problem. Once I deleted the Exchange account from my iPhone I was able to turn off passcode.

Hope this helps.