The system has changed recently. They are hoping that everything is going to work faster now, but we obviously don't know yet.
Because they are now claiming that they will process the application as soon as they have opened it and confirmed that all the documents are there, so *theoretically* you won't need to be asking for the passport back because the permit will be issued straight away.
A vast number of people wait until the last minute to apply for this permit, usually because they need it to travel for work. But the thing to remember is that you have the right to be in the UK no matter if you have anything in your passport. This is not a visa, it does not confer rights, it just confirms rights which are enshrined in EU law.
Vicky