Whatever the cops prefer, the passport is equally valid and they should know that.
He obviously knew that, but it does not prevent him from asking for other ID that is preferred. Now, what you don’t want to do is LIE to the officer, because even if that is all that is necessary - if you say you don’t have it and you actually do have it on you, then you can easily get into a pile of trouble for lying to the officer,
SO ... no matter what you think, you better tell him the truth - or else exercise your right not to talk to am officer - at which point they’ll most likely detain you ... :-) ...
I think the cop got the feeling that these kids were playing a game with him and he was right —
If he asks for a DL and you have a DL but then give him a Passport instead, then he has the right to be a little upset.
Cops are used to reading DLs not Passports.