This isn't a viable option in practice, because Passkeys use "Resident Keys". This means the credential needs to be stored on the Yubikey - which has a limited number of key slots. Need to log in to more than 25 (I believe) websites? Tough luck!
Basically, the security key stores a single symmetric key. It'll generate a public/private keypair on registration, encrypt it, and send it to the server. On authentication the server will return the keypair back to the security key, which decrypts it and uses the retrieved private key for authentication.