Your completely right. They are already headed down this path and, in all honesty, have been for years. The Xbox handheld that was rumored has been axed and they basically chose to work with Asus on the Xbox Ally. The future Xbox console is rumored to be essentially a pc with xbox software. My money is the Xbox Ally is a testbed for the software for next gen Xbox (if a true standalone console is to be made).

Even 5 years ago, when working for them, the goal is to get Microsoft service on multiple platforms. The services (365, Azure, etc.)across Microsoft are what makes the company money, not products. They make more money selling Windows license to 3rd parties than the Surface product line. Their goal is to get you using their Xbox platform on whatever device you want to. As long as you're a subscriber, they honestly don't give 2 shits on what device you use.

I think it's smart of them to keep all gaming products under the XBOX brand.

I don't have any issues with that, I just think that fragmenting the brand across so many different SKUs makes it tough if you're a retailer.

I suspect the next XBOX (if there is one at all) will be just like the Steam Deck, just a PC in a suit, booting into the XBOX PC app, with an optional Windows desktop.

That's more or less what the Xbox already is, just without the Windows desktop. In fact, that's pretty much what the original pitch for the first Xbox was. Obviously they don't bother with the desktop environment or the print spooler or whatever, but "PC in a suit" is basically the way they do everything. And the Switch is Nintendo's "Android tablet in a suit." I think PlayStation is still on a bespoke kernel, but I'm not sure.

The game subscription is XBOX GamePass and the cloud service is Xbox Cloud. Simple enough.

Is it simple, though? You boot up your Xbox (app) to connect to Xbox (Cloud) and play a game on Xbox (GamePass) with your friends on Xbox (Live)? That's simple?

If they were all bundled, that would be one thing. But you have to buy all of those elements individually, and there are probably different tiers of each, and it might be doable, but I guarantee you that I'd prefer not to think through it all.

I know it may be confusing but it's a transition that's long overdue. The console market as a whole is losing market share to PCs, so why not just make a PC that works like a console?

That would be pretty nice, and since Valve has already done the market research on that, it seems like an easy win for Microsoft. But then again, the "PC in a trenchcoat" is what they've nominally been doing this whole time, so who knows if the "Windows living room box" is ever going to happen.

And anyone can optionally buy their own hardware and use that as an XBOX.

I doubt they'll ever truly give users that freedom. OEMs (like ROG) sure, but I kinda doubt they're going to let people just put the Xbox app on whatever hardware they bought.