On a practical level I think this attitude has held security back for years.

WebAuthn's killer feature is that it stops most phishing cold. Not OAuth phishing, not more exotic approaches that involve e.g. DNS hijacking, but nearly all of what's out there today. And it doesn't need TPMs or attestation or user presence tests for that. Those features are for malware.

Shielding the keys from malware is all well and good, but it's a fine line between stealing the keys used to authenticate and stealing the authenticated session or access token after the user logs in. You can stop the malware from authenticating, but not from accessing. Is this really worth the loss in usability?

Hopefully passkeys get good enough to finally take WebAuthn mainstream, because it's not likely to happen with hardware. I still have Yubikeys for critical production systems, but a couple years ago I started using a virtual USB driver (or HID gadget on Linux) to do the rest through client code. It's all software, the keys are backed up, and I can easily move between computers.

If they'd just started with software half the business world would've adopted this stuff by now.