Update / solution for watchOS 27: the Watch no longer pairs through the iPhone, you have to start pairing from the Watch itself. Step 1: On the Watch, go to Settings > Privacy & Security > Developer Mode > "Pair with [your Mac's name]". Step 2: Xcode Device Hub shows a 6-digit code. Enter it on the Watch. Step 3: The Watch shows up in Device Hub right away and can be used as a run destination (first run copies symbols, which takes a few minutes; keep the Watch unlocked and on the charger). Until you do step 1, the Watch doesn't advertise itself at all, which is why it never appears in Xcode or "Pair Nearby Device". Added this to FB25364030 too. (Watch Ultra 2, watchOS 27.2, Xcode 27.1, macOS 27.2.)

Same issue here with Xcode 27.1 (27A9275), macOS/iOS/watchOS 27.2, Apple Watch Ultra 2 + iPhone 17 Pro. The Watch never appears in Xcode or devicectl at all. dns-sd -B _remotepairing._tcp shows the iPhone advertising (USB + Wi-Fi) but the Watch never advertises, even awake/unlocked on the same Wi-Fi with Developer Mode on. Filed as FB25364030 with devicectl diagnose, co-sysdiagnose (iPhone + Watch) and remotepairingd logs, with the CoreDevice and watchOS sysdiagnose profiles installed.