How does game sharing work and how do I set it up?

Hello, I read your post, and I believe I understand your situation. Xbox Ambassadors are here to help.

May I take just a moment to make note of the intricacy of your charts! That took effort, I've never seen anything like it in these forums, and I'm quite impressed to be honest! I just received my new Xbox one X two days ago, and had quite a similar situation.
from what I had read, and to my understanding I thought any Xbox in my home would be able to play on my Xbox game pass ultimate subscription. Evidently, this is not the case, you can add users to the account on which owns the subscription. I myself opted to
go with a second Xbox game pass ultimate subscription. This way I have the ability to play the full range of games on both Xboxes at the same time.

I hope this helps.

I must answer. Newer saw anything like that in my ambassador time. You are just great! How to answer on something smart and funny like this? Anyway. To be able to play the same game on two Xboxes, the account which bought the game must be set as homeobox
account on S. In that case, anyone on S can share his games, apps, and subscriptions. On the other console, that same account must be logged in to play all its games. But it cannot share since it can have only one home box. If somebody else wants to play must
use this account. And I think that you can't play the same game at the same time on both consoles. So, I think that scenario 7 won't work. Obviously scenario 2 won't work since the owner of the game pass is not logged. The same for 9.

In order to share, the Ultimate, any accounts need to use the Home of the "dog" no matter what scenario. So if I'm reading them correctly, scenarios 3,4,5,and 6 are all set correctly for sharing if the cat is only going to be using the One S.

Yes that is true. It's how the licenses are set up to work with games.

As long as you're not exploiting the license transfer tool to share games, you should not get banned. What you're doing will be fine.

Yes this is how my set up works as well the "shared" console is the "home" console. On this console I have it set to auto sign in with the account that holds the valid gold membership and purchased games. Then I will use the secondary console for my personal
gaming as the other console is set up for shared family use.