Happy to take a look at it further but after initial quick check, this actually could be the expected behavior.

• If there is no single filter, that might mean we see all changes. So it is normal to see Wikidata changes there as well.
• If there is at least one filter included (and Wikidata changes filter is not selected), you should not see Wikidata changes. This is the case in the wikis we tested included nl wiki.

So there might not be a bug here.

Do you experience this situation with no filter chosen or some others filters chosen? Could you please share a screenshot of your filters right after you clicked the Watchlist icon?

This is not what users expect when they uncheck the option "Show Wikidata edits in your watchlist". They expect no Wikidata edits to show on Wikipedia.
If the option does nothing remove it, otherwise change the label so it's more clear for users what the option does.