There are other points that OP missed:
- Games were supposed to be region locked
- Not only were games region locked, the entire console and Live were supposed to be region locked, so that you cannot access it outside the country. Even to the extent that the console outside Tier 1 would not work because it was not able to connect to Live (issue brought forward by US military personnel - submariners
- Also, it is easy to forget that the 24-hour check in was not the original plan.
The original was a constant online presence - no internet no XBox. The 24 hour parole officer was actually a backtrack from that.
OP paints other restrictions rather positively, and adds other speculation never announced or intended to work. Game trade in would have been horrible for anyone a bit farther from a licensed reseller (basically everyone outside US metro areas would have been screwed)
Sometimes I hope that they never backtracked on their ideas, just to see how bad it would have gotten.
I think they would have sold half of what they did in the US and Uk, next to nothing in other 11 Tier 1 countries, and would have never even gotten to Tier 2 launch.