D
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There is no hardware required to implement VRR, it's entirely a software (firmware) implementation. It took Sony a year-and-a-sodding-half implement suspend-and-resume on PS4 (firmware 2.50 - March 2015), a feature they showed off at PS4's reveal in February 2013. Like all teams, Sony will prioritise features and I would bet that the reason that VRR hasn't been delivered is that PS5 telemetry shows very people people have them hooked up to VRR-capable displays. There may also be some embarrassment if Sony do not have a good offering of TVs supporting VRR so that may be a factor.If Sony doesn't provide VRR by the end of the year, one would assume that the PS5 hardware is incapable of VRR support, and that Sony has made a grave mistake in mentioning it.
On a software/firmware levels, if both devices support VRR then during the connection negotiation phase, the display well send an index table of supported resolutions and frame rates. Once in receipt of this, the host (console/PC) can request a new refresh rateusing the HDMI command line. It's kind of idiot proof.