Resetting location and privacy is super duper annoying so I fiddled for a bit. Adding and removing a city on the iPhone help bring the list back, but what ultimately worked for me is just turning off location services on the iPhone and turning it back on. The current location option reappeared on the Watch and would let me set it as a default again. It appears to be behaving normally now. I can’t imagine what a nightmare it must be for Apple’s developers to handle all of the setting across integrations. They’ve been pretty responsive with updates, but maybe a little too responsive.