EDIT - after doing some research, I believe this is not a bug, but rather a software limitation
Turns out you cannot use 3rd party passkeys on Android 13 or below - you need Android 14 to use 1Password passkeys or YubiKey passkeys to log in to websites etc.
Reference...
Account security is essential. Provide your users with choice and increase account security.
Extended Two Factor by nanocode aims to add more 2FA methods that are more secure and convenient for your users.
Current supported 2FA methods:
Security Key (Fido U2F), adding support for YubiKey as...