I have to say, I played KI on Xbox One at a Microsoft store this weekend and I was not impressed. Honestly, if they’d told me it was on Xbox 360, I would have believed it.
Like it says in the story, Target did not properly label standard editions of the console. Presumably, they did label the Day One Edition consoles, which is why a few standard edition ones shipped immediately upon receipt at the warehouse.
I’m sure the ban only applies to online play. In the TOS, it says that online features may be suspended at any time for any reason.