AI is not a great source to ask for any sort of factual information, just a heads up. Its good for creating new stuff, like improvising story narratives or something like being a TTRPG dungeon master, though. I just wouldn’t ever rely on anything it says to ever be factually true.

Im not an Xbox/Microsoft employee, but I will answer to the best of my knowledge. Some or all may be wrong though.

1. Both.
2. It does not transform the game at all as long as there are no bugs. Usually the only benefit is increase internal resolution, and sometimes increased franerate. Everything else is identical to the original release.
3. AFAIK, no. When you install the game it doesn’t actually copy the files, it downloads them because some of the files are patched. No internet means you cant download. I think it also needs occasional connection to check. I do think you can play offline but not for 20 years straight.
4. To my knowledge, no, there is no significant difference. I think it probably is exactly identical, actually. It is however, different from how backwards compatibility worked on the Xbox 360. It is significantly improved.
5. Cross-generational System Link. Its cool being able to have one player on Original Xbox and one on Series X in the same game.