I don't like the idea of not knowing how recovery could work with this kind of move. Is it a cloud backup, an encryption key, or something? If there's a recovery mechanism, I hope it's open source or something.

I'm also curious whether there's a compatibility issue with BIP-39. The mnemonic seeds, and maybe it could be moved to another type of wallet like Trezor.

This is exactly the dilemma and why seedless wallets came out. First of all, it is true that a seed means that it could be hacked too, considering most people do not store it safely, some even just write it somewhere on their pc and save it in some folder, so if they are hacked, a hacker could reach it easily.

But just because the seed phrase is not 100% safe, that doesn't mean that seedless is safe either. Just like others said, in case of an emergency and in some situations where you can't access it, the money is fully gone, and there is no way to recover it. Which is why I would say that both sides have problems and it's not an easy task at all. I would guess that it is not going to be easy for either of them to be mainstream because of "security" reasons; other reasons will play a bigger part.

I can’t say whether it’s a good idea or bad idea because it ultimately depends on the level of trust you are willing to place in the manufacturer and how much control you want over your private keys and your recovery seed phrase. If I were you I would quietly purchase another trusted hardware wallet and move all my bitcoins from the Keystone hardware wallet to the new wallet, because I don’t understand what is wrong with the Keystone hardware wallet manufacturer. How does manufacturer expect users to restore their wallet if their devices are stolen or become faulty?