This is genuinely a great feature Xbox has added. Now if they could figure out a way to get it work with Xbox 360 and OG Xbox games. 

Also guessing you can't redeem your games on a PC and has to be done on an Xbox One or Series X?

Correct. Windows doesn't support reading Xbox discs, nor does it support reading UHD discs at all anymore. I believe that feature was sunset a few years ago.

Even if it could read the original Xbox One's Blu-ray discs, it wouldn't be that many games, as the One S introduced UHD support.

So I am out of luck. Not that I have many Xbox One games for it to matter. It is more so having dozens of Xbox 360 and OG Xbox games.

Yeah for OG Xbox and 360 discs, just gotta hope that it eventually gets added down the road. Since those discs don't have any unique ID attached to them the way XOne/Xbox Series discs do, a lot more work would need to go into adding support.

They could either charge a small fee and/or require inserting the discs once a year or every X months.

Xbox game discs, including Series, use standard dual layer blurays (50gb capacity) not UHD. The original Xbox One without a UHD capable drive can play all Xbox one games after all, and now read Xbox series discs to make them digital.

But yes a standard PC Blu-ray drive can't read Xbox One / Series discs, nor can pc drives read x360 or OG Xbox discs by default.

There is a firmware called omnidrive that can be flashed to certain drives that lets them read discs from all Xbox consoles so it might be technically possible for MS to release something that would allow any generic Blu-ray drive to read them but I think the chances of it happening are extremely slim. They're certainly not going to do it if flashing new firmware to a drive is the only possible technical solution.