That’s not a financial decision. That’s just them lacking technical expertise. And let’s be real - the S is not some kind of potato. It’s perfectly capable. You need ever so slightly less detailed 3D models and textures than on the X but I don’t remember this being a huge issue during the PS4 generation.

Not having lots of SKUs and a user-managed OS is kinda what the console experience is about. Steam OS does not deliver a console experience. Steam Deck kinda does (except not really), but Steam OS is just a part of that.

MS has sold more S than X, according to a quick google. Not sure why you’d want to port a game to Xbox Series X without making the game playable on S.