That feature will kill the standard outside of mandated (corporate/gov) use cases. There's no way I want to have to worry about registering 2-3 FIDO2 keys with every site I currently use passwords for. And there's no way I'd trust Google's (or any other company) OAuth to be my master login for every site.. assuming they all take OAuth and that Google accepted multiple FIDO2 keys.

IMO it's a mis-feature and will keep it from eliminating passwords. In fact I think it will only reinforce password use as the one good case for it is to lock your password manager.