I think i have found the issue. When prompted by Google Password Manager to fill the passkey, there is a small message that says “Other Passkeys”. Clicking on the message will display another prompt from Bitwarden to login with Passkey.
Deleting the passkey entry from Google Pass. Manager resolves the issue too and Bitwarden is immediately promting to complete aign in using passkey.
Now that BW can manage passkeys on Android, it wouldn’t harm to start removing the saved entries from Google Password Manager.