I noticed this behavior as well after upgrading to watchos 10.4 The only solution I've found is to erase the watch and restore it. That will allow it to connect ONCE to xcode. If you unpair the watch from xcode, it will never again show in the list, despite anything you might try, except for restoring the watch again.

Checking the console, it says the watch is waiting to accept the Trust dialogue box click. It's not showing up on my watch screen! This is new in 10.4!! Please fix!!!

I submitted feedback as well for this.

This might be fixed now. I updated to IOS 17.4.1, and updated xcode to 15.3, and now the watch is in the device list again. I dare not unpair it to test. But hopefully optimistic.