We asked Apple to comment on the issue, although watchOS 7.0.1 doesn’t seem to have fixed the issues. Newer watches (including this author’s Series 5) don’t seem to care. It is also unclear whether the issues affect Series 3 watches purchased directly from Apple with watchOS 7 already installed.
There is a good chance it will be fixed in an upcoming release. Even so, it’s not a great experience for owners of a device that is still considered current.