I have had issue with sleep focus on my watch 8 since late in the iOS 16/ WatchOS 9 betas. I opened a feedback in Oct 2023 when 10.1 betas.
When sleep focus is on the watch shows it's active and did not alert but it still works like normal.
It used to go dark and I could tap the screen to see the time and press the crown to exit from that mode to use it.
I wish this would be fixed. I'm tried of having to use theater mode with I go do bed. The light of the watch is
