What you described with the "might as well give up" is literally the idea behind Project Helix. It's a PC branded as Xbox with some compatibility layers glued in.
Xbox now is a game studio, not a console manufacturer. Look at them through that lens. Doom, Halo, Overwatch, Fallout, whatever else, whether you are into them or not, they own a lot of franchises and those are their core now.
Depending on the hardware, if they let you get to a desktop, and you can run regular windows programs (especially steam and emulators) it might actually be worth it for some people. Especially for households where nobody owns a desktop/laptop, just phones and tablets.
As far as I'm aware so far, the plan is to have Windows boot into "Xbox mode", like the Steam Deck boots into "big picture". And have an exit button to get a normal desktop and other stores/games.
Basically just trying to challenge Valve on the scale of Microsoft's access to hardware and undercutting their price while doing the same thing with a different default store. Also compatibility with actual Xbox games, which won't be a thing on the steam deck.
I'm not sure what the point of vibe reading is when the announcement[1] is right there and explicitly calls out third party store support, being able to play "your PC games", and the fact that the device will run Windows. Could they backtrack on all this? Maybe, but it seems a bit too late for that.
The only thing I'm not certain of is the exact shape of the "exit button". It could be a "desktop app" like Windows 8 had, instead. Could be some way to add third party games to the Xbox launcher UI. Barely relevant, anyway.
Xbox now is a game studio, not a console manufacturer. Look at them through that lens. Doom, Halo, Overwatch, Fallout, whatever else, whether you are into them or not, they own a lot of franchises and those are their core now.