I found this reddit thread that has a lengthy explanation to the issue.
https://www.reddit.com/r/sony/comments/fqf71z/wh1000xm3\_can\_only\_use\_stereo\_or\_handsfree\_but/
At the end, there is no solution for this, it's one or the other, but not both at the same time.
I have learnt to live with this, an so far is bearable.
My default audio playback is set to the "stereo" device of my Bluetooth headset. So I can listen content in all of its splendor/fidelity.
My default communications device for both playback and recording is set to the "hands free" device of my Bluetooth headset.
I know that if I enter a Teams/Meet/Zoom, the playback of the "stereo" device will stop, so If I need to hear audio from other apps simultaneously while in a Teams/Meet/Zoom, I need to set the default audio playback device to the "hands free" device. Although the audio quality will be lowered, it is acceptable for remote collaboration.
Hope this helps.