New flashlight icon that I believe was introduced with 12.22 appears and hovers at 12 o'clock on the watch face after turning on the flashlight. However, if you turn the light off, the flashlight icon remains and will pixelate as portions of the top screen updates.
Example: On the stock E3 watch face, at the 11 o'clock widget, I have weekly miles and steps at the 1 o'clock widget. When flashlight icon remains with the flashlight off, it will begin to disappear as I take steps, i.e., the portion of the flashlight icon hovering over the 1 o'clock widget
Work around: The only work around I've found is to force screen refresh by scrolling.