I think MS doing the right move. They went the "easy" route. Porting the xbox core to a more open platform would have been quite a challenge. And going the emulation route, wasn't probably the best idea, since you would need a much beefier hardware. Today it doesn't seem like the current xbox model is sustainable, so having 3rd party xbox "certified" consoles seems like a good idea. I can see Lenovo, MSI and others jumping in the bandwagon (or going the steam OS route). It's only natural it could evolve to Xbox gaming PCs with a gaming oriented OS aka Xbox Experience.
The Xbox Ally is capable of running pretty much every windows game (as long as performance is in line) Compatibility is way better than SteamOS will ever be at least natively. It WON'T be able to run native xbox games, but you can run PC ports of xbox games plus all the PC game pass library.  If you must play original Xbox games, there's always Xbox Cloud Gaming, you'll need an internet connection, but still.
If the rumored pricing is real, it will be hard to sell IMO. More so the Xbox Ally X.