>e.g. a USB-C to 3.5mm audio adaptor can be entirely passive, it just needs the right resistor in it.

How does that work? is each USB-C host port, or downstream USB-C hub port required to contain a stereo DAC? Does the standard impose performance requirements like dynamic range, noise, minimum sample rate,...? Does it also mandate the jack can be used for mic / line-in? Does it similarily stipulate inclusion of an ADC in each port?

It doesn't mandate any of that, it's an optional feature.

The data pins are repurposed for analog audio, so it won't work with hubs. You'd of course need a DAC for output and an ADC for mic input, but the point is to replace a headset jack, so you'd have those already.

https://www.usb.org/sites/default/files/USB%20Type-C%20Spec%... (PDF, page 309)