For me, the hardware is not the problem. This is typical Microsoft attempting to fix something that isn't broken.
The games are the issue. What's the point in powerful Xbox hardware when the game is still crippled by Series S?
Focus on games. Get control of the studios. If a game isn't working, have the balls to cancel it, rather than release it and tarnish the IP and brand.
Its the acquisition of talented artists, animators, writers, sound and music people, programmers who want to tell a story through the Lense of a protagonist. That now costs $40 million on the low end and $200 million if you want to make God of War Ragnarok. Talented studios with a vision to express themselves through the medium of video games is hard to come by, which in itself is a topic of its own.
As far as hardware is concerned with Nextbox:
Point 1
They are NOT going to abandon their current Xbox software like how Sony did with PS3. If anything, MS has proven to resurrect and enhance games- my favorite being: Panzer Dragoon Orta 4K. If the NextBox is going through OEM route (which I am hoping they will be) playing your Series X|S and One|OneX|360 on the nextbox is a guarantee through: gamepass, xcloud, and either an external or internal ultra blu ray disk drive (hoping it is external). No way in hell for that to be abandoned.
Point 2:
Besides AMD, if the next box is going through OEM route: Intel, Qualcomm, NVIDIA are damn well going to join the party and offer a series of gaming devices and form factors in both x86 and ARM architecture. Mobile gaming is something I see MS going after, which is something that current gen consoles (besides Nintendo) doesn't offer. Playing games on a mobile device with Windows OS with 5G/Wifi6E-Wifi7 with console like graphics is a big fucking deal. Apple has already teased it with Residents Evil 4 Remake. MS along with their hardware partners are going to fucking nail it.
Point 3:
ARM has gained significant momentum along with AI, MS has now have to address that by updating their software tools, modifying their OS specifically tailored to gaming and taking ARM more seriously. I think MS will streamline game development, reduce costs and time in game development by the assistance of AI and make gaming development more accessible. If everyday people can make apps and put it on apple, google play, and MS store and make content on youtube why cant people make video games the same way?
Point4:
The Xbox branding and marketing was a stepping stone needed to establish the fact and show people that MS is serious about gaming. They have accomplished that, because it's certainly better than apples or googles. It may not be as good as Sony's and Nintendo, but at this point that doesnt matter anymore. I see MS trying to make gaming ubiquitous and eliminating hardware constraints, and "tribalism" of console gaming culture.