The Steam launcher client itself is still on X, it will run on Xwayland. What the store front Steam runs on is irrelevant though. The Steam helper will run the game on the best possible configuration for the machine, and gamescope can run proton compatibility on Wayland, as long as the game runs on a library that supports it. If the game doesn't support a Wayland capable library, the game will be run through Xwayland. This is literally how the Steam Deck works. The Steam client not being Wayland is not on itself any limitation on the graphical quality of the games.