It can recover your wallet using "trusted phone contacts".. So they keep your keys?

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Not your wallet keys but a different set of keys. See the Social Recovery section https://bitkey.build/content/files/2023/11/Bitkey-Recovery-Features.pdf

It has a nice set of trade offs on that front IMHO

No, they give block (who keeps your keys) authority to migrate your wallet to new keys.

Not your keys, not your Bitcoin.

If it were tremendously useful for trading I might put a few sats on it, just for throwing around money. Like a bank.

But for my BTC savings, I'll keep my own keys.