Can a passport renewal be applied while H1B Extension/H1B Transfer is in process?
Does the USCIS take into account the passport expiry date while making a decision on the H1B Extension/H1B Transfer processing?
Can we renew the passport while H1B Extension/H1B Transfer is in progress? Do we need to notify USCIS if passport number is changed?
yes, you can. It will not matter.
No, they will not take into account. It is the I-94 that matters. When they give you the approval, they may give you a shorter approval time for I-94. You need to get that fixed. Read How to fix I-94 after Passport renewal.. You can notify them, if you have the new passport. Talk to your attorney and send the passport copy through them.