@x3m, I can confirm that this works... I've just tested this workflow using Bitcoin Core (TestNet) 0.20.0 and a Ledger Nano S. I installed the "HWI" Python module (and libusb) and was able to successfully create a "watching only" wallet within Bitcoin Core. I funded it with 0.1 tBTC and was then able to create the PSBT, finalise it and send it using HWI, my Ledger Nano S and bitcoin-cli.
I did get an "Unverified Inputs" warning on the Ledger device when signing the transaction, but I was able to "ignore" that error and continue.
@achow101, is that warning possibly due to the fact that the transaction that created the UTXO I was spending only had 1 confirmation when I was attempting to sign the transaction?