As @mrbell says, there appears to be no explicit mention anywhere of books and audiobooks being excluded in Family Setup.
It appears to me that the Family Setup lane of the Watch app is simply feature incomplete or poorly thought out.
My feeling is that over the years, the Watch product has forked in several different directions, and the development team has been unable to keep up with the various use cases that result. In this case, a cellular Watch configured via Family Setup to be used independently, can only run its preinstalled apps: the Watch app on my phone which is used to configure it simply does not allow me to add Books, Audible, or numerous other apps to the Watch.
There are substantial numbers of users, like our family, who have a Watch with a cellular connection and don't particularly want it to be connected to an iPhone. I don't want my son to get all of my texts and emails on his Watch, and I also don't want him to have a phone yet; the cellular Watch seemed like a perfect compromise.
If I configure it with my Apple account on my watch, it plays Audible and other audiobooks great. But if I configure it independently via Family Setup, it becomes much less flexible.
