iOS third-party password manager integration has gotten better over the years. It went from nonexistent, to half-working but constantly pushing me to use iCloud passwords instead, to allowing third-party to be the default once I set it up and never mentioning iCloud passwords to me during normal use.
If blocking this integration will ever be in their interest (I can't say much about this though), then they'll just tighten the grip as soon as passkeys are the norm and other auth methods are deprecated. It's always easy to invoke generic or obscure "security" reasons, even if it means creating the problems themselves so they come with the solution just in time.
