Hi Chris,
The option being greyed out usually means the passkey service is being controlled by another setting or policy, rather than the toggle itself being broken.
I would check these first:
Go to Settings → Accounts → Passkeys.
Open Advanced options and check if any other passkey manager/provider is enabled.
Go to Settings → Privacy & security → Passkey access and check which apps are allowed to access passkeys.
Go back to Settings → Accounts → Passkeys and delete any existing Windows passkeys you don't want.
Restart the PC and check Advanced options again.
Microsoft confirms that Save passkeys to this Windows device is normally controlled from this page, but the feature can also be disabled/controlled by an organization policy.
Since you are seeing the switch but it is greyed out, I would also check:
Settings → Accounts → Access work or school
If this PC is connected to a work/school account, a policy may be controlling the setting.
If it is a personal PC with no work/school account, let me know your Windows 11 version/build (Win + R → winver). That will help narrow down why the toggle is locked.
Thanks