What is the issue with the HTML Standard?

While testing the implementation for auto sizes in the latest Chrome betas (v121) I noticed that images using object-fit: contain were getting skewed. I've created a reduced test case to demonstrate the behavior I'm seeing.

I noticed in #4654 (comment) that @aFarkas mentioned some known quirks with calculating height with object-fit, so perhaps this is expected behavior? Wondering if @zcorpan has any advice here.