Is it ok to use Kodi on Xbox however we wish to use it or is it pirating ?

using pirate software on Xbox is never permitted.

you need to either buy them on DVD or from a legitimate digital provider, or subscribe to a streaming service that will also provide them. Most of those services allow you to pay to remove ads

Don't use DLNA.

Use Kodi from Xbox app store, setup NFS shares on the QNAP (see Kodi NFS wiki).

Add NFS shared folder to Kodi and it will play content much better than DLNA.

There is a way to use Kodi on your XBox One, but you con't download it as an app. I don't see why XBox live would ban you for having Kodi, since it isn't an illegal download or streaming site, but I don't work for XBox, Microsoft, Kodi, or any other related
company/organization.

XBMC used to be connected to XBox, but as I understand it, they are no longer affiliated.

Kodi disappeared from Xbox? All you need to know
It's worth noting that as of January 12, Kodi has been unavailable on the Microsoft Store temporarily.

A Kodi official has responded to users on the official forums, confirming that the team is aware of the problem.

"We are aware of the problem which has resulted in the disappearance of the Xbox version of Kodi from the Microsoft Store."

"Members of the team are currently working on resolving the issue."

"We appreciate your patience and we should have it visible in the store soon."

Kodi disappeared from Xbox? All you need to know
It's worth noting that as of January 12, Kodi has been unavailable on the Microsoft Store temporarily.

A Kodi official has responded to users on the official forums, confirming that the team is aware of the problem.

"We are aware of the problem which has resulted in the disappearance of the Xbox version of Kodi from the Microsoft Store."

"Members of the team are currently working on resolving the issue."

"We appreciate your patience and we should have it visible in the store soon."