Can't rest in the watch bedroom area with Sally. Dont know if this is the same for anyone else.

I can rest, and have done it several times.

Make sure that you've been wanded into the Watch faction.

I have. I Could rest but today I couldnt. I'll check again

This seems to be a bit erratic. Entering the area and returning should fix it, though.

For now, this is a very low priority issue.