This is a rollup of findings from this thread as well as others here and in other forums:
The most important thing to know: "watchdog" is a mechanism that causes a kernel panic when some portion of the operating system freezes for about two minutes. These system-hangs are symptoms, and they can have many causes. Many of you will need to solve your problem in a different way.
The three most common causes: Kernel extensions (vendors often label them as "drivers"), iOS sync issues, and USB or Thunderbolt problems.
Kernel Extensions:
Kernel extensions often come with software that supports third-party peripherals, as well as security software such as firewall or antivirus software.
If you're using something with a kernel extension, make sure you have the most recent version of the extension. Also, visit the vendor website and ensure that the vendor explicitly says the extension supports Big Sur. If they don't specifically say this, then you take a big risk by continuing to use it. There is a very high probability that an out of date or unsupported extension will cause kernel hangs or panics.
You should always perform the above checks prior to upgrading macOS versions. In general, it's best to select hardware that does not require the installation of additional kernel extensions.
iOS Sync Issues:
If you have one or more iOS devices (iPhone, iPad, iPod Touch) that are configured to support Wi-Fi sync, then these can cause kernel panics under Catalina and Big Sur. The more devices you have, the greater the chance of a panic.
macOS does not cleanly handle weak Wi-Fi or devices leaving Wi-Fi range in the middle of a sync. There is a bug that can cause macOS to unmount the wrong volume when sync fails. This can even result in your system volume being unmounted, which hangs the OS.
A common scenario is plugging your iPhone into a power charger that is distant from your Mac, where Wi-Fi is weak. This triggers a Wi-Fi sync session from a bad network position.
If you have one or more iOS devices, connect each via a USB to Lightning cable, find the device in the Finder sidebar (remember, Catalina and newer do not use iTunes for this), and disable the "Sync with this (device) over Wi-Fi" option. You can always reverse this change later if you find that your kernel panics continue.
USB and Thunderbolt Issues:
As much as many of us resist advice about unplugging all external components and gradually re-introducing them over time in order to isolate issues, this often points to the solution. Even many 20-year Mac users have found that they spent waiting for corrective OS updates when a $2 USB cable was the problem.
USB and Thunderbolt issues can take many forms. Generally speaking, however, macOS has little tolerance for any peripheral acting erratically. A device that does not cause visible symptoms under Windows or Linux can still cause problems under macOS.
A weak cable can cause data errors, or it can cause macOS to incorrectly detect that the device is repeatedly attached and detached. If either happens too frequently it can cause problems with macOS or macOS kernel extensions, including the drivers that ship as part of macOS. Similar to the iOS and Wi-Fi issue, repeatedly attaching and detaching USB drives can cause the wrong device to become unmounted, for example.
A very long cable or a low-quality cable can act as an antenna, adding radio interference that inhibits the correct operation of your Mac's hardware.
A peripheral which does not correctly report its power draw can cause not only that peripheral but other peripherals (including internal parts of the Mac) to shut down in an immediate and unclean fashion in order to protect your Mac and peripherals.
Keep in mind that most modern external monitors have a USB or Thunderbolt bus component in addition to the display signal component. Monitors are not immune from causing USB or Thunderbolt issues.
Good Luck
I know these panics are hair-pullingly frustrating. I feel that pain. I personally dealt with two machines that took months to resolve, and even went through getting logic board swaps that didn't solve the issue. If this saves even one of you from a similar experience, then I'm glad I took the time to roll this all up.