When you have Reject Unknown Caller enabled, your incoming calling number must be saved in a format that the network can recognise for it to be allowed and unblocked.
Edit your number in the watch's Phone Book using the App in the correct format including your country code and using no spaces or dashes.
For the USA, use +1, area code and number, eg. +15551231234
If outside the US, use + your country code and number, eg +447777123123
An activated SIM card is always required for correct functionality.