Hearing from ex colleagues.Where are you 'hearing' that? :/
Series S is already supposed to basically be a large loss leader for Xbox, so dropping price another $70 seems pretty rough. A disc-less XSX could make some sense, but at $400 I think it really does require that Series S discount, or else the difference between a $300 Series S and $400 Series X makes the Series X a no-brainer choice.
I think it might make more sense for Series S to increase to 1TB storage as the new default spec at the same current price. Improves on a console that is still selling well, without having to take further drastic hits on margins for little benefit in sales. Storage is super cheap right now.
The series S has already been on sale for $200 at woot and amazon last holiday so I don't think hitting a price point near that will be that hard for them. I heard $230-250 for the reduction. Right now its $300 vs $500 so if we see a $230 vs 400 its still a sizable gap and the series s gets very close to the magic number of $200.
As for the series S getting a storage upgrade that is possible. However I think they will try to use the cost of the storage cards to blunt some of the decrease in revenue.
Also what the series S and X cost in 2020 isn't what they cost in Fall of 2023.