The Series S was a $300 base next gen console that just took the place of the last gen One X, when the true next gen consoles were $500. The Series S was always going to be a lesser experience, and a far lesser experience as the gen went on.
The point of the Series S is for those who want the cheapest hardware possible who can live with what you might call a hybrid gen experience. They're getting last gen performance for the entirety of this gen due to present gen architecture.
MS offers a higher tier more expensive X model for those who want the full next gen experience. It's up to the consumer to choose what's best for them, and they even have the choice to spend more and upgrade at any time if they like.
If MS were that concerned, they'd discontinue the Series S, drop Series X to $400 and force everyone to buy an X from now on while devs continue to poorly optimize for those still using their S. This could be an option, especially against a $400 PS5 Slim (holiday 2023).
The hardcore crowd may not agree, but to the casuals, the Series S is good enough for many of them. As long as the games aren't a broken mess, they'll be content with their cheap XB and cheap Game Pass.