It's the same issue and I'm pretty sure it's related to the update, I also managed to unlock it somehow by multiple pressing home button and turning the bezel - then was not able to activate water lock (it did nothing when selected). Restart of watch helps in both cases, but it's really annoying, hopefully will be fixed with next update...
I realized that my problem is different. I can turn on water lock, but it doesn't show in the quick settings panel. But if I go to the settings advanced settings, I can see that water lock is on. I can turn it off there, too. Seems like it's just the quick settings shade that's broken for me. And only for that feature.
I found the solution to my problem: this happened with new DUJA update for those only, who changed windows, transition, animation scale in developers option (i prefer speed over animation). Once you change it back to x1 - water lock works perfectly again. Case closed.
Strange. I can confirm what @LarasLTU said. I had all 3 animations turned off and so the water lock went crazy. Now I went back to 1x speed on all 3 animations and it's working again.
Maybe a reboot might help you after turning animations off and on again?