I am also experiencing this same problem. Has anybody (Apple included) discovered a fix or workaround for this bug?
The gist of the problem is that we (problem reporters) want to be able to use our Apple Watch "normally" if we wake-up early and then easily put it back into sleep mode when we are ready to return to our slumber time.
The "official" Apple answer is totally unacceptable. Apple tells you to turn, turn, turn, turn, turn, turn ... the Digitial Crown (as if you are using the remove water feature after swimming). First, this is way too cumbersome! I just want to press the crown or the side button (or a combo) and have the watch wake-up and let me do all the wonderful things Apple Watch allows. Second, even if you do that cumbersome method, then it does NOT last long. As the initial problem reported says, the minute you lower your wrist/arm, the watch goes back into it's sleep monitoring mode (with the dimmed, dumbed-down display) and you're forced to use the cumbersome (squeeze out the the water) method with the Digital Crown.
The replies indicating you should just scroll up the watch face and hit the blue-lighted, bed icon are partly right and partly wrong. It will bring the watch out of sleep monitoring mode; but, you will lose that night's sleep data!
In the interim, I got so frustrated with not being able to fully use my watch even after doing the "water squeezey thing" with the Digital Crown (which only lasts until you lower your arm) that I toggled off all sleep and "do not disturb" settings. This is a drastic workaround but at least I get a fully functional watch again when I wake up early (or don't go to sleep before the sleep mode trigger time).
Hopefully, Apple's software engineers either already have a fix (or are working on one) for a future WatchOS release.
Seasons Greetings,
Tony