Even with all of Microsoft's effort and deep pockets the Xbox brand has gone down the drain.
At some point in the 2010s Microsoft started to give up on Xbox, the Xbox skulljak originated around 2017-2018 and its gotten worse since (the brand, not the wojak).
If a console performs poorly for its entire lifespan, the successor usually doesn't do very well either, no matter what they change. We've seen this happen with Xbox, Atari (2600 good, 5200 bad, everything else a failure), and Sega (MD good, Saturn bad, again). I also just think the PS2 was simply too much of a monster to stop because of it being a cheap DVD player.
That's not really true, though, in both examples and extenuating circumstances. The Atari 7800 was delayed by two years under Atari Corporation, and when Tramiel had bought most of the company from Warner Communications he had gutted the company so stuff like the original Atari's marketing department wasn't there. It was an outdated console up against the growing NES market, so it was bound for failure no matter what.
Even with Sega the Master System languished in obscurity during its release but it was the Mega Drive/Genesis where it really began to shine. The counter-example is of course Nintendo who did it twice, first with the Wii following the GameCube, which started out in a close third place and ended in a long third place, then releasing the Nintendo Switch as a follow-up to the Wii U.
Microsoft's "Backward Compatibility" is NOT really backward compatibility. It is recompiled binaries for the games they bless for it. That is why you can't play any licensed games that the licenses expired for, games from small and obscure publishers who went out of business and things of that nature. You aren't playing the Xbox or 360 version of the game on a Series X, you are playing a Series X port of that game.
Xbox always had problems with backwards compatibility, though. I can't find a PDF of the relevant issue of Electronic Gaming Monthly, so I'll have to go with this
NeoGAF thread from 2006 quoting the relevant parts of the article, basically Xbox 360 was backwards compatible with shovelware trash instead of (or at least before) some of the Xbox's more popular games.
I'm actually not sure how the PlayStation 2 did PlayStation 1 compatibility, if it was powerful enough for emulation or if the Emotion Engine was just built off the PlayStation's CPU. There's a list of
games that don't work or don't work properly on even the original PS2 models.
Nintendo never did backwards compatibility on its home consoles until the Wii and that's because the Wii's hardware was similar to the GameCube's (both on PowerPC-based processors).
It is hard to overstate how unlikely this notion is, save bundling the entire Saturn in each Dreamcast. The Saturn was an absolute cluster nightmare of hardware. The Dreamcast was a substantially more refined design. The way to highlight this point is that Dreamcast emulation often works where Saturn doesn't, due to the cost of emulating the insane Saturn hardware.
Sega was a sucker for console add-ons and
wayward Dreamcast fans have speculated on add-ons increasing that power, but a comment points out that there wasn't a high-speed port for the Dreamcast, meaning no RAM upgrades or anything.
But you're right, the processor architecture was so different that in the end it would've been almost as expensive as a real Sega Saturn with its main features parasitizing the Dreamcast for AV and controller ports.
To be honest, of the add-ons proposed, the Zip drive accessory had more hope than the DVD drive peripheral, as Zip disks could do what the N64DD wanted to do, that is, copy and import data from computers more effectively...but without the software to support it, it's useless.
