I just want to add a small note about this. I completely understand how you are feeling here re: users getting confused.
That said, we (and you as the site admin for your instance) have a bit of a role to play here. We all know passwords aren’t perfect, people are used to them yes, but they often forget them, have a hard time coming up with safe passwords, tend to reuse them etc. One way to get people to a better place for their own security is to promote passkeys wherever we can. Yes, at first, it is going to be confusing for non-technical users. But the more they see passkeys in the tools they use the more likely they are to try them. And once they (hopefully) get past that first hurdle, they might end up liking and using passkeys, driving up adoption and eventually they’ll become as familiar as password. And… safer!
That’s the reasoning anyway behind making this a default ON feature and hiding the site setting. The web industry at large is supporting passkeys and we’re doing a small part to promote their use. (That’s my 5-second pitch for “leave this setting enabled, please and help your users learn to use passkeys”.)