I have touch set to on for general use and off for activities. After the activity touch wasn't working correctly and at first, I thought the screen had frozen or stopped working, similar to what's shown in the video. Seems to be an issue with tap to wake? This is on the music model, firmware 27.09.
https://youtube.com/shorts/FfTEnSKVJLc (issue shown via controls menu, but it's similar for an activity)
Add a controls shortcut to enable / disable touch. I also have gesture set to off and AOD off.
Wait a few minutes.
Use the controls menu to enable touch.
Press back to go to the watch face and let it time out. (mine is set to 4s)
Touch doesn't work but if you press a button to activate the screen, it starts working.
The issue seems to be intermittent, but I've reproduced it a few times.