Dynamic 1080p 60fps is the sweet spot for this machine. Will it sometimes drop to 900p or so? Sure, of course it will. That's fine.
The important thing this gen is that the LCD console targets 60fps, and has the CPU grunt to deliver on that.
1080p and under is fine in this price range. The IQ difference is negligible to most people anyway at livingroom distances. The bigger problem for MS is that PS5 digital is not that much more expensive and yet delivers the full spec. Hardcore-curious gamers have very little incentive to save $100 for dramatically reduced performance.
Anyway, nice to see MS change the target for this thing to be more realistic. I still think Series S is a fantastic little machine, and I would definitely consider getting one, even for my Sony X900H. If I didn't have a gaming PC then that would be my Bethesda Box, let's say.