I’ve repaired several Apple Watches, but have never had touch issues with them. To my knowledge, the force touch gasket is only responsible for the “3D Touch” functionality of the display, not the touch itself. I’ve had watches where I broke the gasket but it would function without it. Since you already tried reconnected the screen, I don’t think it is a connection issue. The only guess I would have to what happened is perhaps the swollen battery pressed on the bottom of the screen and broke the touch functionality, or perhaps some damage occurred during the repair. You could try with a new force touch gasket as it would be the cheapest solution, but personally I don’t think that would fix the issue. It is likely an issue with the screen assembly itself.
If you want to try a new screen, perhaps try looking for iCloud locked series 1 watches on craigslist/facebook marketplace or eBay. It might be cheaper to buy a locked watch to salvage for the screen as opposed to just buying a new screen.
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