The passport photo that humans see when looking at the passport is not the biometric information that allows the person to be positively identified. AFAIK the biometric information is recorded by a special camera designed for the purpose (and at airports, there is another camera like that which records the iris (?) and compares it with the data stored in the passport (not in the human-visible photo)). I am quite sure the passport photos contains nowhere near the information to positively identify every person within billions. The reason the biometric information was added to passports was because the photo itself is not able to positively identify people.
I have a biometric passport, and when I applied for it they did
not take a photograph with a special camera and they did
not do an iris scan. I submitted the form and an ordinary 38 x 50mm B&W photograph, printed from a small basic JPEG from a hand-held D200. That photograph is the
only source of the information on the chip. The identifying data is the distance between the pupils, the length of the nose, etc. The measurements are made from a scan of the photograph you submit and compared with the same measurements made by the camera at the airport. That is why they are so fussy about orientation and expression.
As you say, whether that process truly identifies people uniquely is doubtful, but the authorities seem to think it is close enough. The reason a photograph meeting biometric standards is sensitive data, and therefore subject to a higher level of protection, is that it can be used for identity theft. I expect we all agree that is something the law ought to be trying to prevent.