You don’t need a Watch Pass for any streaming done in your own home. It’s only for remote access in situations where you or the server owner don’t have an active Plex Pass.
Regarding the low picture quality, is it possible that Plex is not seeing your iPad as a local device anymore, and then you’re being restricted by a Plex Relay connection for some reason? I was reminded of this post by ChuckPA where he mentions Apple attempting to anonymize network connections and that this might be making your server no longer see the iPad as in your own home. You might need to adjust a setting on the iPad so the Plex app is confirmed able to access things on your local network.
