Passthrough worked fine for me - didn't have any issues here... (Quest 3, used SideQuest to upload to the hardware)
I love the concept of this and having virtual pets in MR would be great! There's a few things I'd say would need improvement here (I know it's not finished, but they're are worth mentioning anyway). Obviously there's physics and movement issues that happen quite frequently in this - and I'd suggest, if you aren't doing so already, that you have separate target objects in the scene and use velocity on the physics objects to move towards them, rather trying to place the physics objects directly. Doing it this way can eliminate quite a lot of physics issues, especially when objects are trying to occupy the same space.
The cat movement is great, nice job on that! However I found that the ball toy was also rotating and aiming in the direction I was pointing the thumbstick in too. I'd suggest making the shadows more transparent, they are a little too obvious and most rooms have subtle soft shadows when artificially lit, so there's a disconnect between the MR shadows and the real-world.
All in all, it's great - feels like there needs to be more interactions and things to do, but so far it's looking great!