Enabling touch ID on Mac Mini (M1/M2) with Magic Keyboard

It seems some folks (like me) are having problems enabling touch ID on a Mac Mini, with the newer magic keyboard that's compatible with Apple Silicon (M1 & M2). The keyboard setup instruction says to quickly double tap the power button on the Mac Mini. Double tapping the power button didn't do anything for me initially. I found I had to turn off "unlock with apple watch" in touch ID and password settings, to finish the setup. Once I switched that off, the "double tap power button" worked fine. Then I turned "unlock with apple watch" back on.