Larian Studios could be forced to make sacrifices with Baldur's Gate 3 on Xbox

Larian says the main issue is with the split-screen/local co-op mode and the XSS.

That suggests to me that this is a RAM issue. CPU power between XSX and XSS is nearly but not exactly identical. GPU power is separated by a big gap but that's more or less worked around by changing the resolution. That leaves RAM as the differentiating factor. Xbox, like most consoles, has a unified memory system with a single pool of RAM for both CPU and GPU uses.

I think that the problem here is that split-screen co-op is forcing more of the RAM requirements to the CPU than is typical for a current gen console game. The XSX, having a larger pool of RAM, can handle this fine. The XSS cannot. For PC they just don't have to guarantee that all these scenarios work with acceptable performance on any specific configuration — if split-screen co-cop plays like shit on a min-spec PC, well, too bad. For consoles that won't fly.

There's no real magic solution to this. They could spend a lot of time trying to optimize their code and assets to minimize the memory footprint, but that's not certain to be enough and would be a lot of work with little benefit in other markets. They could axe the feature for Xbox, but I don't know how well that'd go over with players.