Same problem here using Catalina. Disabling Connect via network (as mentioned above) doesn't help. Xcode 12.3 is unusable. Thank you Apple.

I have to correct me.  Disabling "Connect via network" works for me, Xcode needed a restart.

Same here on macOS. My App ID configuration in the developer portal has WeatherKit checked in both "Capabilities" and "App Services". My Xcode project has WeatherKit added as a capability in "Signing & Capabilities".