I'm seeing dw work correctly here on beta 5. Maybe worth an Xcode restart?

In the menu bar, tap Editor, then at the bottom there's Vim Mode.

I would like to add that this change has harmed users. Users who either have to choose to show an annoying blue indicator permanently in the Dynamic Island / status bar, or experience worse battery life. This change should be rolled back, for the sake of users. It's a lose lose for them, regardless of which of the two options developers choose.