Figured this out. ZStacks take the largest child, and make that it's size. So in the cases above, it's taking the nested ZStack Rectangle, and making it fill as much as possible. If a frame is applied to the Rectangle in the nested ZStack, you can see the size of the RowView adjust to fit.
Javoid
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One thing to note is that this is NOT the full project from the WWDC. The images will not display perfectly square and aligned. You will also notice the full list of sandwiches is also missing in the sandwich testData. But you don't need it. The points in this project/video are still valid.
Here - https://github.com/bymartin/Sandwiches/tree/main/Shared/Assets.xcassets are the images.
You will need to download them one by one, or download the whole project, and drag them out of the folder.