It's not an either/or situation, I think. A cheap laptop that can play modern Xbox games comfortably at 1080p is very difficult to find and it CERTAINLY won't cost $299 or less outside of Black Friday. Game streaming is another matter but, then again, pretty soon we won't even need a device for that, Smart TVs or dirt-cheap streaming sticks will take care of that.

On the other hand a decent user experience for Edge on Xbox Series S would not benefit the Xbox business revenue-wise, but it would be a nice bonus that does not actually cost Microsoft anything to implement. Nobody is going to replace a true PC with this. But it could come in handy in certain situations or at a pinch.

I really think it could be done and probably should be done. It all comes down to how much Microsoft feels that it's worth the effort on their part or not. But since half of the work is done anyway, I mean the development of Edge proper, all it would take is a careful fine-tuning in usability and functionality.