Well if you want to work out who actually makes better games than instead of comparing apple to oranges its best to compare apples to apples. No point comparing a Card game to a Racing game. The genres MS invest in they tend to do the best in.
It also wont be embarrassing for MS because this gen we haven't seen much of MS competing in the 3rd person action market aside from Gears 4 and 5 which I would be quite comfortable to put them up against the best 3rd person action games this gen. You can also argue the same point going with Xbox games, where FPS and the Racing genre Xbox have dominated in much the same with Sony dominating the story telling 3rd person games. If rumours are true than that's why MS created The Intuitive, who are rumoured to be creating a story telling 3rd person action game.
Honestly not many games have been made internally by MS/Xbox this gen, a lot of the games released have been contracted to other developers to make. But when you look at the games MS have made internally, they have been quite solid releases and quality wise, they are up there with the AAA standards. Its just Sony had this gen firing on all cylinders, with majority of there 1st party studios delivering while MS were in the mix of closing and buying and basically relied on 3 to 4 1st party studios to make games while the rest were again sourced from outside.
1- I was comparing general game quality from both first party studios, not genre specific, because that would always be bias toward whatever genre any person prefers. You consistently have Sony 1st party games in the goty discussion year after year, how many first party Xbox games were even in contention this gen?
2- "It also wont be embarrassing for MS because..." we don't know what will or won't. I said it was embarrassing to compare the output in terms of 3rd person action games. Meaning in the past, I don't predict the future. Also, "rumors... are rumored" made me chuckle a bit, it sums up greatly your counterpoints.
3- Exactly, not many games have been made by Xbox 1st party, thank you for making my point for me. They have a ton of studios and still, nothing worth noting comes out (except Forza, those guys are prolific if nothing else). Solid releases like state of decay 2, sea of thieves and crackdown 3...