Passwordless has existed for a long time at MS, and it is for the user's benefit. And this is not related to Windows Hello, which was one of the many ways to authenticate and also a branding for a set of methods. 2FA can use, and sometimes for almost 20, fingerprints, SMS, OTP, and PIN, hardware security keys, and it seems this is the topic, FIDO "passkeys" (which are not replacing 2FA, in the sense you have to unlock them, or that may still be asked for another auth even with magic passkeys), which were supported already, but generation and storage, if I may, were provided by 3rd parties, and for a long time, now they can be stored by Microsoft.
Any provider can generate a passkey for Microsoft... And this can be used with Windows Hello or Samsung Knox-backed authentication...
None of my passkeys are stored in Microsoft Auth, even for Microsoft accounts, and I have not been "nagged" nor harassed by Microsoft on the topic.
Microsoft is the first by far to have offered true passwordless authentication, for instance, and unified tech like Windows Hello (and probably support for fingerprint scanners; they existed before Touch ID, before anyone asks).
I don't really understand what the issue is here. You can add many ways to authenticate. If the issue is that you have to use a passkey (from any provider), a secure authentication method, and not the same password you use everywhere since 2003... this is another debate.