How the Lighthouse fallback content audit fails
In the Lighthouse report UI the full PWA badge is given when you pass all of the audits in all of the PWA subcategories (Fast and reliable, Installable, and PWA optimized).
Progressive enhancement is a large and contentious topic. One camp says that, in order to adhere to the strategy of progressive enhancement, pages should be layered so that basic content and page functionality only require HTML. See Smashing Magazine's Progressive Enhancement: What It Is, And How To Use It for an example of this approach.
Another camp believes that this strict approach is unfeasible or unnecessary for many modern, large-scale web applications and suggests using inline critical-path CSS in the document
<head> for absolutely critical page styles.