Most gamers are used to either playing games on PC or owning a console

Last I checked, Microsoft makes both game consoles and the suffered that runs 90% of PCs...

the decentralized nature of Xcloud is frankly confusing for general consumers

They're not selling "XCloud". They are selling Xbox Game Pass, now with cloud streaming. Are consumers confused by Netflix?

Moreover, for many Game Pass will be an extension of their Xbox console and PC investments, not a stand alone alternative, like Stadia.

Not everyone will want to game all the time on their phones or tablets. If Game Pass takes off among people who are not currently Xbox customers, it could drive new, incremental console sales for Microsoft among people who want to game at home.

It's all unproven now. But in 5 years time, I like Microsoft's chances.