I also did notice the same issue, I have a device that still running iOS 26.3 and another one with 26.4, when I make a change the 26.3 get the background notification and update the data but on the device with 26.4 it is not working. I tested also watchOS 26.4 it is working perfectly the notification is processed.

I had the same issue, what I did to fix the issue, in the Widgets IntentTimelineProvider I had initialised the NSManagedContext in the constructor, just trying to remove this initialisation and putting it in the timeline method did fix the issue for me. I didn't have to separate the live activity in its own target and now both live activity and widgets are on the same target and working. If you initialise something like CoreData in the constructor of your IntentTimelineProvider in one the widgets you have try to move it out of there maybe it will fix your issue.

I have this same issue of slow simulator but only on my Intel machine, in the M1 ones everything works smoothly.