Unable to enter or change my passcode on my Apple Watch, option is greyed out

Re: Apple Watchh SE: "On the watch and on the watch app, it doesn’t let me turn on passcode and change it.

Wondering if your Apple Watch SE is using the newest available compatible WatchOS: watchOS 10.6.1

(Some updates may include bug fixes and security updates)

See more info: About watchOS 10 Updates - Apple Support

If your Watch OS is an earlier version, and you choose to update it, it is wise to back-up Watch data first.

Update your Apple Watch - Apple Support

Eg: says: "If your Apple Watch isn't compatible with the latest version of watchOS, Software Update will show you the newest version that your watch can use."

You can follow the steps in the above article.

Any chance you have restrictions enabled on your iPhone in the settings for Screen Time, which do not allow changing Account information? This may also affect the ability to change passwords or passcodes.

Or is a profile installed on your watch or iPhone?