It does not defeat the purpose of 2FA as possession of the decrypted 1Password vault is the second factor.
For that matter, how do they prevent you from using the same password for both?
I posted another comment explaining why 1Password Vault with both a password and a OTP code is still secure, but in short it does not defeat the purpose. Your vault's are protected and in the situation where someone gets access to your vault it's most likely to be full access to your computer at which point they have other viable methods to get access to a specific service you use.
Compromising or stealing a device is a significant escalation from guessing passwords.
Though i have no idea, that's just how i internalized it over the years. In your 1Pass example, it's a single attack vector (the password of my 1pass) to compromising both the token and the password of the product/server/thing.
Eg a hacker can access my computer, even have a clipboard/keylogger on my machine, and have a difficult finding my token if it's on my phone. They need to attack my phone and my computer.
Having them both in your unlocked 1Password vault means if someone walks by your computer they can access your account. A single location with both of your "2FA". If they had a keylogger installed on your machine, they only need your single 1Pass password to breach your "2FA".
Granted i imagine that a Phone TOTP would still be a concern with a keylogger on your PC, since you still enter it on your compromised machine. Still more difficult than the having the totp key though, of course.