Premature resolution of conditional type depending on generic key

[jcalz]

TypeScript Version: 4.0.5 and 4.2.0-dev.20201120

Search Terms: conditional, generic, eager/premature/incorrect, reduction/resolution/collapse/simplification

Code

type What<K extends string> =
    { x: { y: 0, z: 1 } } extends { x: { [P in K]: 0 } } ? true : false;
// What<K> is eagerly simplified to false before instantiation of K
 
type Huh = What<"y"> // expected: true, actual: false. 

Expected behavior:
What<"y"> should evaluate to true, since { x: { y: 0, z: 1 } } extends { x: { y: 0 } }

Actual behavior:
What<"y"> evaluates to false; in face the definition of What<K> gets reduced to just false before K is ever instantiated (at least according to quickinfo)

Playground Link: Provided

Related Issues:
#39364 and #30152 both seem to be in the general category of "over-eager reduction of generic conditional type" but the particulars might not be the same

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From this SO question. @ahejlsberg said this issue is not the same as #39364 so I should open a new issue.

A possible wrinkle: this problem does not seem to exist if we "unwrap" the outer object type:

type Okay<K extends string> =
    { y: 0, z: 1 } extends { [P in K]: 0 } ? true : false;
type AllRight = Okay<"y"> // true