When combined with iOS 14.5, watchOS 7.4 will enable Face ID with face masks as long as your Apple Watch is unlocked and paired with your iPhone. More details here.
There are no new release notes for this beta software update. You can find the release notes for beta 2 here.
Developers can download the watchOS configuration profile from the link below. Please download the iClarified app or follow iClarified on Twitter, Facebook, YouTube, and RSS for updates.