Strangely enough, Google lets me “add” my Yubikey as a passkey, but then does not let me sign in with it due to it not being “recognized”. If I remove it as a passkey, and only use it as a 2FA token, attempt to sign in and use the “Enter your password” option, it will then let me use the key after I’ve entered my password as a second factor.

So it seems Google has removed the error (or its not triggering anymore) as they will have been one of the first sites I tried to create a passkey for, but it still does not let you use it as a passkey.