Everything is working on my watch and iPhone. I checked first thing this morning, and it wasn't. So I did a soft restart, and then went into my settings and toggled the feature off and then on. I put my mask on, and "voila"... it worked.
As for unlocking my watch with my iPhone, that seems to be working just fine. If it's not working for you, you may want to go into settings on your Apple Watch, tap passcode, and see if "unlock with iPhone" is toggled on. If it is, toggle it off, then toggle it back on. Hopefully that will rectify the issue!