I just spent some time reviewing the spec and filing issues. Overall it looks like a great improvement over the status quo, that adds valuable new capabilities to browsers, and (very importantly) is easy to implement and use without dragging along a lot of conceptual baggage (linked data etc.). It solves a minimal set of use cases without trying to solve the entire "credentials problem" or "identity problem."
I don't think the Identity Credentials spec is really relevant to the problem presented here, nor does it show any sign of being grounded in the reality of what browsers and web servers implement today. If those groups want to continue developing that spec then that seems fine but I'm not sure how they expect to get any adoption.