Just updating this from my experience of just over a year using Watch Unlock on my Mac Pro.
it works well when I am the only logged in user. However I soon noticed that Fast User Switching would never use Watch Unlock. Not a big deal, but then a few months ago I realised WU almost NEVER worked. After a restart it would for a while then become either unreliable or cease to function altogether.
After some thought, I narrowed it down to having another user logged in. So having started the Mac, I would log in and WU would work perfectly. But at some point (maybe months later) I would need to log in as a different user. WU would obviously not work for that user, but when returning to my login (other user still logged in), WU would now fail to work. Not in the same way as when I don't have the Watch nearby or it is still locked, but instead it would take a while and then the password entry box would appear. WU would then never work until re-starting the Mac. Restarting the Watch and/or iPhone made NO difference.
Then I realised that this problem had started about the time I began using the other log in (normally hardly ever used) and have found that it is indeed the cause. WU works perfectly until I log in as another user and then doesn't work at all, even for my login that uses the same iCloud account as my Watch and iPhone..
I have not yet determined whether logging out from that other user so I am again the only user logged in allows WU to start functioning again. I still need to check this.
It really seems to be something of a bug since I cannot imagine this is how it is intended to be. The whole WU process relies on all involved devices using the same iCloud account, but Apple seemed to have missed the fact that a Mac might have several at any one time. WU should work for the Mac account/login that shares the iCloud account with Watch and iPhone and not for any other login. Seems simple concept to me. Wouldn't be the first time Apple developers missed something that obvious.
Has anyone else noticed that another user being logged in prevents WU from working?