'Stop competing “sign-in with“ pop-ups in the browser' blocks system passkey prompt

I'm having trouble with iCloud Keychain passkeys and 1Password with Safari.

When
- using Safari
- "Offer to save and sign in with passkeys" is disabled
- "Stop competing “sign-in with“ pop-ups in the browser" is enabled

I am not prompted to save a passkey via the system Safari prompt. E.g. in eBay, when I try to create a passkey, nothing happens - the browser acts as if I've done nothing. When I disable 'Stop competing “sign-in with“ pop-ups in the browser', I'm able to create a passkey properly.

Is the 'Stop competing “sign-in with“ pop-ups in the browser' erroneously blocking passkey prompts as well?

I want my passkeys to live in the system keychain and my passwords to be in 1Password.

1Password Version: 1Password for Mac 8.10.23 (81023003)
Extension Version: 2.19.0
OS Version: macOS 14.2.1
Browser: Safari 17.2.1