Is it possible to sell back digital download games, or trade in for credit?

Nothing like this is possible because the digital code is assigned to your account. It doesn't work on any platform. But Microsoft / Xbox is thinking about something like that.

Unfortunately you can not sell digital games.

I remember was talks some time ago but nothing really seemed to happen think it would be a good idea

Unfortunately not. And tbh, I don't see that happening any time soon. Game Pass is where the business model is moving to for things like this.

No it isn't possible to trade or sell digital copies of games. You can suggest and vote for ideas here: https://xboxideas.uservoice.com/

To add to this.. if you're worried about space on the console then you can delete them and if needs be download the games again from your account. Just because they are not on the console does not mean they are gone 💪