Out of Media Storage - When I am not...

SOLUTION: For anyone else having this issue. I followed the five steps suggested by Randy-12 (below):

1) Unpair the watch from the iPhone

2) Delete the Watch app from the iPhone

3) Force restart the iPhone

4) Download the Watch app and install it

5) Pair the watch back to the iPhone setting it up as new.

HOWEVER:

• the first time I did it I repaired the Apple Watch from backup -- the problem persisted
• the second time I paired as a new Apple Watch (not from backup) -- the problem persisted...

BUT THEN:

• I realized that I selected to have all available apps loaded on the Apple Watch as part of the new pairing, so...'
• I went back and removed all the apps that I did not really need/want from the watch, and...
• THE PROBLEM RESOLVED and I could download music files again...

THUS:

• I believe it is likely that one or more apps are inappropriately interacting with the latest Apple Watch OS update and causing the conflict with music downloads...
• I do not know which one(s) and I have spent enough time on this annoying glitch, so I would just suggest EITHER working backwards and removing a few apps at a time an see if the problem clears, OR removing all optional apps, verifying that the problem is cleared, then adding apps back whilst checking.

Thank you Randy-12 for the assist, and thank you Apple for releasing yet another buggy OS update that wastes my valuable and very limited free time.

Thank you very much for the suggestion. I followed the steps, nut it did not work. I did, however, restore the watch from the backup it made during the unpairing. Maybe this is why?