[RPG] How does Keen Sight affect Passive Perception

Yes, Expertise affects passive Perception checks.

Passive Checks (PHB 175)

Here's how to determine a character's total for a passive check:

10 + all modifiers that normally apply to the check [...]

For example, if a 1st-level character has a Wisdom of 15 and proficiency in Perception, he or she has a passive Wisdom (Perception) score of 14.

Simply put, if you have a WIS mod of +3 and a proficiency bonus of +4 (with proficiency in Perception), your passive Perception score will be 10 + 7, or 17. If you have Expertise in Perception, the +4 is doubled, so you're correct in judging that your passive Perception score will be 21.

Even better, if you're in a context that would grant you advantage on your Perception check, your passive Perception would be no less than 26, thanks to how advantage modifies your passive Perception score:

If the character has advantage on the check, add 5. For disadvantage, subtract 5.

Ability Checks

The DM calls for an ability check when a character or monster attempts an action that has a chance of failure. When the outcome is uncertain, the dice determine the results. (PHB p.174, "Ability Checks," emphasis mine.)

When deciding whether to use a roll, ask yourself two questions:

• Is a task so easy and so free of conflict and stress that there should be no chance of failure?
• Is a task so inappropriate or impossible--such as hitting the moon with an arrow--that it can't work? (DMG p.237, "Using Ability Scores," emphases mine.)

So the rules say that the GM should only allow your perception checks in situations where it would even be possible to perceive something. On top of this they might be disadvantaged, or penalized, or have DC-adjustments. In other words, it's up to your GM to decide "\$Y\$ is the altitude above which I do't even have you make checks, \$Z\$ is the altitude above which those checks are disadvantaged" or however they'd like to handle it.

Do they apply in your hypotheticals? Impossible to say without considering, as DaleM does in his answer, the sizes of objects and your flying height and speed. Really, this is one of those situations where you and you GM might spend an afternoon at a coffee shop trolling Wikipedia for information on visual acuity.

I do know one thing, though: If you're putting a lot more mechanical granularity into your character's vision than your table-mates are into their characters' vision, be careful. In that situation you're actually playing with a different quality of playing-piece than the rest of your table-mates, which can lead to tension down the road.