When using Istio no mesh ReplicaSet Failures are still not being propagated

[gabo1208]

What version of Knative?

all

Expected Behavior

After #14453 when a Replicaset fails, the Knative Service should fail fast and tell the user what is happening (from the Deployment Status)

Actual Behavior

When using Istio with the no-mesh option, the ReplicaSet Failure is not propagated and is acting as it was before, waiting for a ProgressDeadline error

Steps to Reproduce the Problem

Configure Istio no mesh setup and run TestResourceQuotaError

[dprotaso]

/assign @gabo1208

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