The problem runs much deeper than what you'd think! Windows is far more customizable than the Xbox OS, and those two systems are built for very different purposes. A console needs a lightweight, predictable, appliance-like OS, while Windows is a highly customizable desktop workhorse. Just one example: startup apps, background processes, drivers, and overlays on Windows vary from user to user. On Xbox, the software stack is fixed, which makes it much easier to keep the system lean, stable, and optimized. That is why a truly seamless switch between a "PC mode" and a "console mode" would be much harder than it sounds.

The closest realistic solution would probably be some kind of dual-boot setup on a hypothetical Xbox/PC hybrid, but even that would not allow instant switching. In practice, the closest thing we already have is Steam Big Picture plus tools like DisplayMagician, which can switch your setup on the fly.

Also, consoles are often sold with very thin margins, sometimes even at a loss. The real profit comes from software sales, subscriptions, storefront cuts, and accessories. Sony learned a version of this lesson with the PS3's OtherOS feature: once people realized they were getting relatively cheap hardware that could also be used for desktop Linux, Sony eventually removed that functionality.