With near-perfect backward compatibility, the arguments against a tech update are diminished. But one big one remains: for customers who recently purchased an Xbox Series X|S, if a new system comes out that doesn't at least require a version of newly released games still run on those models (like the current requirements for Series X games to also run on Series S), they would rightly feel cheated.
So, as long as all games still run on Series S and X, even if only at 30fps, then I see no reason not to do as big an update as possible.
Having said that, I think the easiest and most logical update is to focus on the terrible ray tracing capabilities inherent to the AMD GPU. It's not clear to me that even RDNA 4 will reach parity with Nvidia on ray tracing and path tracing, but AMD has said that's their focus. They've even said that raster performance may decrease between GPU generations in order to channel all improvements into ray tracing -- a smart compromise, if true. For me, ray tracing (and even more so path tracing) is far more visually compelling than the update from 1080p to 4K at any given framerate.
A new system that is functionally the same as the prior models but has the GPU to enable ray tracing/path tracing in games would be a solid mid-gen refresh. This would mean that the same games play identically (or nearly identically) on both, but look far better on the new model.
Doesn't help with this generation (assuming even games optimized for the new system will still need to run on Series X|S), but perhaps for next-gen, if GPUs are sufficiently performant to reliably provide path-tracing support for most games, that also becomes a HUGE time saver to developers who can eliminate all the time they spend (waste) baking in lighting tricks. I think we're still a few years from this, but the first generation of consoles with graphics capabilities at this level will allow game devs to start thinking this way. That's the next big leap in gaming, because it will be like a huge gift to every dev team (eliminating all that time spent on fake lighting tricks).
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