In my case, this is not related to an update. My phone and watch are on most current version OS. If I reset the watch and re-pair, it works normally, but I can see the available storage fill up over about an hour until it is full again. I have not been able to figure out what is eating up the storage. Under Usage, I only have the built in Apple apps installed and they are all under about 10MB or no data used. Upon speaking to Apple Care, they advise this is a known issue, but don't currently have a fix. I'm hoping we get a WatchOS 7.6.2 before WatchOS 8. I would normally be buying the new watch in a few weeks, but I'm probably not going to until I know the issue is fixed.