It turns out that most people don't want the need to re-generate each of their credentials when they lose their device.
And the sad truth is: Most people have no password manager at all. They are used to re-generate new passwords every time they want to log in! I'd wager that on some websites the vast majority of people are loggin in by pressing "I forgot my password".
Apple has also made it clear they have privacy concerns about attestation as well, which is also why they don't support it, but backup and syncing are clearly very important to Apple because that is very important to keeping consumers happy.