I thought that the "unlock with Apple Watch" feature was broken but it turns out that the real issue is that the wifi is broken.
Previous version (whatever the last "solid" release was, maybe 1.4.7?) worked fine, and because I had both wifi and Ethernet on the iMac I was oblivious to the fact that there was a wifi issue because I still had connectivity.
This morning, I just decided to pull the Ethernet cable and while the wifi connects, I get no connectivity.
Troubleshooting this a little more but it looks like this is what killed the Apple Watch unlock.
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