I haven't even finished reading your post and I'm already quoting/responding since my Series S is scheduled to arrive tomorrow and I've been doing a bit of research on this since it's the console's biggest flaw... now, let me finish reading your post and see if I have any thoughts/advice..ha ha.
ok, yes. your assessment is correct. the official Seagate drives that plug into the expansion slot would allow you to play all games (Series S and backward) directly from that storage... but like you said, they're stupid expensive and unless they eventually drop in price I am planning to not go that route.
the alternative is that you could buy an external USB drive and transfer Series S games as needed. Apparently you can play backwards compatible games directly off the external, though with longer load times, but the speed needed for Series games requires they be internal or expansion card.
I don't play CoD Warzone, but many of my friends do so I'm assuming that'll be taking up a HUGE chunk of my available 364 GB. as well as Forza, so I'm assuming I'll need extra memory pronto as well, but at the current prices I see myself getting a USB drive as I can't justify the Expansion Card prices
the multiplayer crashing and Cloud options I can't comment on at the moment, but as a soon-to-be owner I'm certainly curious about this stuff