For clarity the new timer has not failed, but give me the rainbow light show after being paired with ST for few minutes. The original timer was behaving the same way but eventually fully failed (Inovelli confirmed that the dimmer was dead).
As you say, thinking about logically, the dimmer, electrical wiring and load (Inovelli smart bulbs) did not change and I replaced the Aeotec bypass to get it out if the equation. So that left the z-wave network and hub. The hub get periodically updated by ST, and I add and move or remove devices on the network from time to time.
Could a change in the hub or network trigger that issue? The dimmer is actually the closest z-wave device from the hub, maybe 5 feet.
I truly ran out of ways to troubleshoot this one. Any help is appreciated.