I think the fact that I've not added any passkeys makes the fact that I'm asked to use one while logging in worse.
Jefronty,
And you've just exposed the true problem with any evolution to a new system, which in this case involves the entire authentication system Microsoft supports for all of its users on both the Azure - Work and School accounts and Outlook.com - Personal accounts systems.
The issue is everyone looks at it from their own point of view and no one other than Microsoft or a few highly technical individuals who must deal with both sets of users bothers to think about the potential issues created by the interaction between both sets of systems, as well as the entirely new interactions created by the support for passkeys themselves.
What I suspect has happened is that Microsoft began to see multiple different issues with the introduction of passkeys where the combination of these and the existing methods supported by the use of the Microsoft authenticator, security keys and the other verification methods resulted in confusion and/or failures of authentication for some portion of the user base.
In order to deal with this in the short run, the only guaranteed way to ensure that anyone with any combination of the various accounts and verification methods, authenticator apps, security keys or other even more rare items like 3rd-party smart cards was to cause all of them to be displayed in the same interface, potentially requiring more clicks for any of them.
Though for pre-existing users of items like security keys this means a change requiring more clicks, the arguably more important issue for Microsoft would clearly be the clarity of use for the much larger consumer population for the new passkeys, so those were chosen as the initial default and displayed prominently by their expected number of users.
Once the basic operation of these various combinations of authentication methods are deemed to be stable and functioning without significant failures due either to technical or more critically, user confusion issues, Microsoft can consider the various options available to streamline the operation of these methods for the user, likely including setting the default methods selected or displayed for each individual user of a system, while still supporting the needs for a new user who has yet to have logged any activity and thus should receive the list of all available options at least initially on that system.
In other words, Microsoft can never assume someone won't wish to use passkeys, since that's the entire reason for this evolution with the intent to be the eventual removal of passwords altogether at some time far in the future, whether that's what you personally prefer or not.
As I've likely already mentioned, you have the right and responsibility to share your preferences with Microsoft using their provided Feedback options, but at this point, Microsoft appears to have prioritized the ease of use for the larger consumer population over the streamlining of operation for skilled users. Ranting here about it will get you nowhere, since no one here is truly Microsoft, we're all either volunteers or contractors, so you're complaining into a black hole.
Rob