Do you think Microsoft should continue to mandate that all games must come to the Series S for as long as the Series X is suppported, or do you think at some point they should cut off the Series S but continue with the Series X?

I don't think it is even a question (at least from a business standpoint as it makes no sense and Microsoft would never ever consider it)... So yeah, "Stick with it".
What about all the people who bought it? You cannot just "drop" it mid-generation when you sell it as a console that will (and it will) support all games for this generation. The console will be supported and will not be dropped until the end of the generation.

People are overreacting every time one dev. is complaining about how the Series S cannot (or does not want to make the effort) to downscale a game for the Series S?

The Series S is here to STAY. And devs will get used to it. Yes, they will cry every time they have to do more work on like Baldur's Gate 3, they can simply disable one feature. But in the end; this is one of the best deals for gamers on the market and there is no reason to drop it.

Scaling down (memory, GPU, etc.) is a thing that has been happening on PC for decades and it was never a problem. 

They should have put the same amount of RAM in the Series S. Surprise, RAM is used for more than just holding 4K textures. Now it's too late and MS will have to stick with it.

The reality is it's more costly to develop for Series S/X than PS5 with it's one hardware target. Plus a larger install base that is still used to paying for games. MS pretty much made sure PS5 will be the target platform with X and S the ports.

It was a good idea, yet 16GB RAM is already very little nowadays, 10GB with only 8GB at a decent speed is the bottleneck.

I think that they will eventually stop requiring games to launch on S, and they will discontinue production of the S before they stop producing the X. But, I don't think either of those things is about to occur. Maybe they are dropping a requirement of feature parity right now. But, we're at least a few years away from them dropping the requirement that games released for X have to release on S.

I think there is a very high chance of both of these occurring, unless Microsoft is planning to launch their next generation console(s) by 2026, which I think is absolutely not going to happen.

That has been one of my arguments from day 1.

Keep the CPU speed and Ram capacity the same, but scale down the GPU, storage and memory speed to hit targets... Makes porting far easier, not all games can just sacrifice GPU effects to fit within the Series S limitations... Some games employ higher levels of simulation and scripting which can be demanding on hardware... And with poor visuals.

If only the One X had an SSD and a Ryzen CPU cluster...

Don't get me wrong, I do like the Series S when games are built with it in mind, it's small, light, compact and perfect for smaller displays... It has actually been one of Microsoft's shining points in terms of hardware sales for the last few generations.

I would like to see it continued to be supported, because... Well. We have it on the Market now, we are stuck with it.

Nah, the Series S is fine as a more budget version of the Xbox Series. Does it result in some problems, most recently with split screen for BG3? Sure. But that doesn't mean series S gets useless suddenly. It is expected that you pay less and get a somewhat reduced experience, but still the option exists to allow people with less money to dip their toes into the platform. So the befit of having Series S available by far outweighs the downsides. Or to look at it another way: BG3 may lack split screen on series S, but without series S some players might not be able to play the game at all. I think that makes it a fine option.

And I agree that the lack of memory is the biggest problem of Series S. As MS designed it they probably only thought about scaling graphics and how lower res textures need less RAM, but graphics is not the only thing you can use the RAM for. So more of it even for S would'Ve been good.

I predicted MS to stop mandating Series S mid-late in the generation, and I'm sticking with this. I just can't see Microsoft mandating Series S for crossgen games until 2032 lol. The system is underpowered and not popular.

But honestly... it's a tricky question to answer because Microsoft has many viable options to choose from. They can launch a portable Series S, revitalizing interest and support. They can end this generation much sooner. They can take a PC-like "system requirement" approach, thereby killing generations. And they can also exit the console hardware business altogether. Once they acquire ABK, they will be an unstoppable force in gaming regardless of what happens to Xbox.

I'd definitely prefer them dropping Series S as a mandatory platform, better late then never, early UE5 games are already pretty damn heavy. I may have had other ideas if I were a Series S owner/fan though.

They chained themselves to that boulder. There is no going back. They made it cheap so a lot of people bought it.
A lot of people bought it so they can't drop it.
It's also probably the reason they are saying they won't do a "mid-gen" console.

I think more people will be happy there is a cheap version than people angry they aren't getting the best of the best.

They should drop it after the 2028-2030 hardware upgrade/generation. They can’t drop it right now.

I think there is a middle ground here - series S should continue to be supported by MS with game parity. But I feel like there should be more flexibility when it comes to feature parity. In the Baldurs Gate scenario MS should have allowed the game to ship on series S with no co-op from the start. While you might say that this sets a bad precedent, MS can get around this by forcing developers to apply to them to have features skipped - which they can decline obviously. A bit more admin but you will never have a scenario where a massive IP skips Xbox.