@iserith has the right of the example being one for how ad/dis interact, but if we're going to look at it as a possible conflict in advice for application of passive checks, it's very simply resolved by stepping back a bit. A check is only called for by the GM if the action taken has an uncertain outcome and a meaning consequence of failure. This applies to passive checks as well. In this example, the GM in question made the call to ask for a check and determined that a passive check was appropriate given the duration of the action in question. Done.
I like that they were allowed the passive check (with penalty) in spite of "not paying attention". Similarly, I like that passive checks are similarly allowed to find hiding things even when someone isn't actively searching.
I'm not sure how "duration of the action" comes to play in this example.
It doesn't feel like the DM had much of a determination to make in terms of what sort of check was appropriate here. Is the DM even allowed by RAW to call for a perception roll for someone "not paying attention"? The player has certainly declared an action, but the action explicitly does not involve perceiving what is ahead. From what I've seen and what @iserith said it seems not to fall under when calling for a roll is allowed.
Finally, to address the comment upthread (I'm being lazy and not looking for it, apologies) that asked what happens if a player starts using real world knowledge about sciencey and tech things in game, creating gunpowder being a given example -- that's, again, entirely a problem created by the GM. Your world doesn't have to have gunpowder, or have gunpowder that works at all like the real world. Or it's magic. Frankly, this is a trivial problem, and really an opportunity to work with that player to create an interesting sideline where they create gunpowder. If it's a continuous problem, or violently against the premise of the game, then it's not even an in-game problem -- you need to take this out-of-game and deal with it as real people. Again, if this is actually a problem, it's entirely the fault of the GM.
There are a large number of things that are harder to wave away than gun powder. It feels strange to have to declare some combinations of arithmetic and the simple machines don't work just to thwart an entrepreneurial character (anything involving more than five simple machines in tandem are attacked by gremlins?). Taking it out-of-the-game and dealing with it as real people seems like the obvious solution to me.