I have found a little more information on this, but I have not yet been able to pinpoint it. I thought I would share where I am at in case it helps someone else find this issue. I found that if I build the app with Xcode 14.0 and remove CryptoSwift as a package dependency most of the time I can get it to work. I say most of the time because sometimes when I do a clean build on a new simulator it still does not work. But about 80% of the time it is working for me when I do this. I then tried Xcode 14.1 with CryptoSwift removed from my project and I got it to work once, but I was never able to get it to work again when I would do a fresh build.
With each of these tests I was using a watchOS 9.0 simulator. I then tried building with Xcode 14.0 without CryptoSwift as a dependency and I was able to select my app for the action button on my Apple Watch Ultra running watchOS 9.3.
This does seem to point to a bug in Xcode 14.2 with the build settings and dependences. I am going to keep experimenting to see if I can pinpoint exactly what the combination is that makes it work.
I am able to get https://github.com/KhaosT/WatchActionButtonExample to work just fine with Xcode 14.2.
If anyone else is seeing this and has information on this issue, I would greatly appreciate any insights you might have.