After 85b180f ("qt: Show hint if passphrase is shown and formatting is enabled"), Sway would attempt to tile the pin entry dialog window, because the size constraint was removed.
I'm not sure if this is the right fix, because I don't know how to test pinentry with a passphrase hint, since AFAICT GnuPG doesn't support it yet. But it does solve a problem I've been having since upgrading to 1.2.0 where Sway would try to tile this dialog instead of having it float as it did before.