For example: for a particular use case , I want to go a step beyond ActivityPub, and allow a user who created an account on another server to perform full authentication on my server, effectively become a proxied registered account, granting privileges of a natively registered account.
Does this exist in the fediverse/Lemmy?
Fediverse yes, Lemmy no.
It’s a concept known as “nomadic identity”, where a user can just move around various instances with only the one account. Hubzilla implements this, and Mastodon has something close, by letting users move their accounts around servers as they like.
Lemmy does not implement this (yet), but it is a requested feature.