Microsoft Store Gift

also they clearly weren't able to REDEEM the code since they dont own an xbox but there is no option for a return for me in my order history

Ark is PlayAnywhere, you get both versions

So, you just restated my problem as the solution. Awesome. I don't know anyone with a 360, and do not have a credit card. I can use my microsoft account balance drafted from the gift card to purchase things from the microsoft store, but not the xbox store
on the xbox website, even though it is an xbox gift card, and not a "microsoft store" gift card.

This page covers most of those details. Check the FAQ at the bottom.

The important parts would be

"Do gift cards expire?

No, gift cards purchased at retail never expire. Note that promotional gift cards like those from Microsoft Rewards or Xbox Live Rewards do expire."

"What is the difference between a Microsoft Gift Card and an Xbox Gift Card?

The cards work just the same. Once redeemed to your Microsoft account, you can spend your balance at Microsoft Store online, on Windows, and on Xbox."

"Where can I spend a gift card?

Once redeemed to your Microsoft account, your gift card balance is available to spend when you shop at Microsoft Store online, on Windows, and on Xbox. Gift cards do not currently work at physical Microsoft Stores."

Should cover you. One thing I'm not certain with is if "gift cards" can be used to pre-order physical goods. Might want to check with Microsoft Store support on that?

Microsoft gift cards only work with the Microsoft Store. Just like Amazon gift cards only work with Amazon, and Apple with their products only.