I never store music on my Apple Watch so losing the ability to browse your full iPhone music library in WatchOS 4 is a bit of a bummer. It's not something I use that often but it's handy when I want to switch albums without taking out my phone.
I can understand the move for the Series 3 LTE model where Apple is trying to push a more standalone device capable of streaming directly but, for older models, it would have been nice to have kept it.
iOS regularly has to do things in different ways for different iPhone models so it's not like we don't have a precedent. I guess they're just trying to get you to upgrade.