A locked down Windows “gaming OS” is probably what Xbox wants to go towards in some respects. It gives Microsoft the walled garden that they want, can lock out Valve as much as they fancy, and will likely be paired with some new APIs to set back Proton/WINE a few years. Hell, they could even still release XBOX hardware for that niche.
The same kernel software cryptography could certainly be marketed for single player games and proprietary applications as a solution to piracy.
Don’t like kernel anti cheat in your multiplayer games? here’s kernel anticheat for your single player games!