Same problem here, but I solved it as follows:
1st I deleted in the apple watch app > General/storage/ WhatchOS 10.4 update.
2º I turn off the iPhone and the Apple Whatch
3º I turn on the iPhone and clear the RAM Cache: On an iPhone 12 Pro like mine: volume up key / volume down key / press and hold the power button and DO NOT RELEASE the button until the white power apple appears (yes I know, the turn off the phone bar comes out. Don't listen to it and don't release the power button until you see the white Apple logo. It takes a few seconds)
4º I turn on Apple Watch and once turned on I reset the RAM Cache also: Press and hold both buttons The button and the crown until the white Apple logo (the same, it takes a few seconds to appear and do not release them until then)
5º I enter the Apple Watch app on the iPhone General/System Update and start again (It says that the update to WhatchOS is 750 Mb) Keep the Apple Watch on the charging dock and make sure that both iPhone and Watch are on the same WIFI network.
The download takes a while, but less than before. What takes a LONG time is to prepare the update once downloaded and update the watch. But between an hour and a half and two hours
Be patient and stop looking at the screens. Leave the Apple Watch charging, the iPhone if you can too, side by side and leave them there quietly for an hour and a half or two. When you come back they will be ready to be both used.
I Hope it help
Best wishes
Pablo