No, they aren't saying that. What they're saying is that maybe they'll be able to put the sharing feature back in, but only for your digital purchases.
That seems like a pretty straightforward way to tout the benefits of the Format of Tomorrow.
Disc based purchases are permanently locked out of the features that require or are enabled by the digital download functionally. Originally, all games were essentially digital downloads, with discs merely being a delivery mechanism.
This is only true if you absolutely and positively will not accept the possibility of a physical disc being used more than the digital sharing rules provide, and are willing to cut off your nose to spite your face.
A user could opt-in their disc game to the server, and supplant it in their account as a digital game, potentially replacing it over time or patching in console-specific data to render it just as unique as any other digital download.
Live would keep count, so it's only going to happen within the system as much as the rules permit.
Either this means that one game is subject to server checks, or maybe if the consumer has an ongoing subscription to Live, they can accumulate enough goodie two-shoes points by being a paying customer, or Microsoft could quietly set aside a chunk of the income in its accounting for share abuse.
The best-case scenario is that this brings a huge chunk of the casual sharing activity into the system, potentially with some additional monthly subscriptions as a result of the increased participation.
Worst-case is the system Microsoft has reverted to, where the disc is going to be shared as usual.
The kill switch enabled, and was required for, exactly one thing; letting you sell your games back to a participating retailer.
For it targeting just the one thing, it seemed to hit a bunch of other targets.
Why did it apply to games that never existed in physical form to sell back to a retailer?
Kill switches are a many-splendored thing. You can use them as leverage for lots of stuff all at the same time.
None of the solutions would be anywhere near as transparent as the original set of compromises. They'd all be generally awful logistically, actually.
It transparently hobbled the digital format with checks that really should only apply to discs.