Apple Feedback told me to try with 26.6.1 (which I think was the newest version as of that time). My team and I have tried it with both that version and I think the newest iOS 26 (26.6.2), and fully updated WatchOS, and in both cases it seems to work normally now. We can install the app from the phone to the watch as we did before.
So I think Apple has fixed it and the resolution is to update to the latest versions of iOS and WatchOS (at least iOS 26.6.1).
Topic:
Business & Education
SubTopic:
General
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