The only answer you'll get for that is whatever theory bests fits whatever narrative each "side" wants to believe. Epic has been vague. They've said the demo we saw was only possible due to what Sony has done with the IO, and when pushed for a clarification said that what we saw was the result of years of discussions with Sony on the future of graphics and IO in games, but that the technologies used in the demo would work great on XSX, too.
Has Sweeney chosen his words carefully so as not to downplay Microsoft's console, or his own engine's capabilities on an entire platform? At the end of the day, he makes his money from big studios electing to use his engine, and he's spread his engine wide over all platforms. He wants Unreal Engine to be seen as the premiere engine to select for any project on any platform. They're all his "babies".
On the other hand, is Lumen in the Land of Nanite part Sony IP? Is there some conspiratorial marketing deal between Epic and Sony that forbids Epic from saying it would work just the same or better on XSX, with PS5's IO (which is presumably partly the way it is because of Epic) a waste of money and die space?
Nobody knows, no matter how strongly and confidently they tell you they do, or that it's obvious, or clear, or whatever else. I certainly don't know, even if I do have my gut feelings on it.
It will be interesting to see if LitLoN is released as part of the UE5 SDK.