Why does my Apple Watch only have 4 gb available

I believe the remainder of the total memory is being taken up by internal watchOS functions. One thing you might try is to unpair and pair your watch again and restore from the backup just created. This should result in no loss of data. It deletes all temp and corrupted files and re-indexes the file system.

Unpair and erase your Apple Watch - Apple Support

Set up your Apple Watch - Apple Support

Drive formatting and the installation of watchOS takes up space.

That is where your initial internal drive space has gone.

FYI,

Never, EVER fill up any computer of computing device completely full of data.

Computers and computing devices need a minimum of internal free data storage space for the OS to continue to function normally.

So, for the Watch, you should NOT dip below between 500MB-1.0 GB of free internal data storage space on the watch OR approx. 10% of the total internal drive capacity.

It’sa little different for iPhone/iOS, iPad/iPadOS.

For those devices, at the very least, a minimum of between 2-4 GBs of free data storage space needs to be maintained, AT ALL TIMES, to insure normal/nominal functionalities/operation and general overall performance of any iOS device running iOS/iPadOS.

Then that means 3.9 GB is taken up by Apple. You have 4.1 available for your use and you are using 0.7 GB n(for photos, music, etc.).