Hey Kristy,
I understand you're wanting to stop Now Playing from appearing on the Apple Watch when listening to music on the iPhone.
It sounds like you've adjusted the correct setting, but just to confirm, did you adjust this setting by following these steps? And if you check now, is the setting still off? Open the Apple Watch app on your iPhone and tap the My Watch tab. Tap General, then tap Wake Screen and turn off Auto-launch Audio Apps. This information is from here: Listen to music, podcasts, and audiobooks on your Apple Watch.
If it's still showing on the Apple Watch, try restarting both devices:
How to restart your Apple Watch
Restart your iPhone, iPad, or iPod touch
Cheers!