I was facing same issue. Trying to connect Watch after 1 year and getting the error. Tried everything nothing worked. Finally figured out a way to update. It seems like my watch was running on WatchOS 6 and Iphone 12 is not supporting next update of Watch OS 6, i.e. watchOS 8.8. I had to borrow a iphone 7 and pair my watch and updated it to version 8.8 then unpaired from the borrowed mobile and paired with my iPhone 12 Pro. This time it got updated to WatchOS 10 without any issue. Posting as this may be useful for others.