I am having the same issue. @nick101, I've done everything in that link.
My watch is on my wrist; I unlock it via passcode, just to be sure; I try to turn on the Passcode > Unlock with iPhone setting in the Apple Watch app on my iPhone, after which it displays a "Enter the passcode on your Apple Watch to allow this iPhone to unlock it" dialog; I enter the Passcode into the watch, successfully unlocking it (again, as I just did it a few seconds ago); the dialog on the iPhone disappears, and the Unlock with iPhone toggle does not stay on.
Repeat.
This is truly annoying.