There was a firmware update to my T-Mobile Galaxy Watch on February 23rd and now the this issue is fixed!. When using AOD, the screen brightness when waking the watch up stays at what you set it even when in a dark room now, provided you have "Auto Screen Brightness" set to off.
(To recap the issue that is now fixed: Even with "Auto Screen Brightness" set to off, when using AOD and waking up the watch in a dark or dimly lit environment, the screen brightness was changing to 3 and would only switch back to your original setting when in a brighter environment).
***CLARIFICATION*** The Wake-Up Gesture issue is STILL happening (Wake up watch using wrist gesture-screen stays on only a few seconds instead of what is set in the Screen Timeout setting. If the watch is woken up using the button on the watch, even if Wake-Up Gesture setting is turned on, then the screen will stay on for the duration of what is set in Screen Timeout)
It's now 2019 and still no fix... Now my watch keeps reminding me to turn on night mode around 8pm every ***** night. Night mode is disabled but it automatically disables AOD. There does not seem to be any way of preventing this. $500 watch, I'm not impressed.
And of course the screen dimming is driving me.mad. I still have the receipt so I think I'll return it for a full refund.