Authenticating with Apple Watch works, but logging in doesn't
I have login with Apple Watch enabled (all devices updated to latest version) and my Mac refuses to log me in using the watch - it tries for a few seconds showing a spinner next to "unlocking with your Apple Watch" then fails and displays the password field.
However, once I log in manually, I can use the watch to authenticate things like unlocking preferences, showing password in Safari etc. so it clearly works and is connected to my Mac, it just won't log me in to my account.
I've tried all the various suggestions for fixing this (disabling / enabling / rebooting / deleting keychain items and plists etc.) nothing works.
Occasionally after messing with these settings it will log me in and I think it's fixed but on next try it's broken again. But only for log in, not authenticating after being logged in.