After many attempts trying to figure out what was going on, I was able to resolve this by modernizing the project structure:
Getting rid of the two single platform targets building the SolarKit framework in favor of splitting the SolarKit framework into two multi-platform frameworks which build on top of each other: CoreSolarKit for the basic functionality with watchOS support and ExtendedSolarKit which does not support watchOS.
Converting the watch app target to a single watch app instead of old fashioned app+extension.
Ensuring all target dependencies are explicit and that the app targets correctly bundle the correct non-system frameworks.
I hope this helps somebody.