Passkeys are supposed to cover two authentication factors at once (having your device + biometrics). Because your yubikey doesn't implement biometrics, it's only a single factor, and thus cannot be used as a passkey.
Yubikey can be used as passkey atorage, I do it on Linux desktop/laptop with passkeys. It requires touching it (but no biometrics). I just couldn't make Android ask my hardware device, it wants to handle passkeys by itself.
It's false that passkeys cover biometrics. They cover password + OTP (aka 2FA aka MFA, although BestBuy requires OTP even after logging in with a passkey).
