Hi guys. Thanks for the input. After some testing, I found that the Gmail: Iterate Attachments step was not necessary and the scenario works when I remove it. Since the Watch Emails step is already pulling 2 records, the Iterate step was redundant.
Setting Watch Emails to screen all available files did let it capture both pending attachments. I had to keep resetting this during testing since every time I did a test run it would revert to “From now on”.
As @samliew suggested, I also needed to add the file name and data mapping in the Drive: Update a File modules to make the content update correctly. Everything seems to be working now.
Thanks!