When the sim tries to use too much memory there are two outcomes. It does nothing, over allocates, and CTD is the result. Or it detects the problem and avoids it. Now if the sim needs more memory for something it has to free up memory that it is currently using somewhere else, it can’t just invent more memory.
How does it free up memory? Well it has to drop something. Currently it drops the screen handling and in some planes (eg.747) the whole FMC. Asobo have stated that this is a defensive measure to avoid CTD due to out of RAM. IMO this is a bad decision because on any modern aircraft if you lose the screens it might as well be game over.
What else could they do? It could drop scenery assets. PG, detailed satellite data, and/or modelled scenery. We see this happening at airports where trucks and other clutter look terrible until you get close up on xbox. I don’t think Asobo have gone as far as they need to with this approach.
It could drop traffic, AI or player aircraft, boats and cars etc. I don’t think it does.
It could drop weather, clouds etc. Or at least reduce their fidelity. I don’t think MSFS does this and based on how much simmers love their clouds it might not be popular.
The idea with these is that it would be adaptive. High quality views when the hardware is capable and lower quality when it is not. This can be a lot of work though, who knows if and when Asobo will get there.
The experience has to suffer somewhere though. You can’t eat the cake and still have it, and the xbox RAM is severely limiting to the sim. (16GB is not enough and to think of what we managed in 16kB! But back then I never imagined a whole world simulator would even be possible.)
Seb said he didn’t believe they’d hit the limits of the xbox, I can only think he means in the vanilla sim state. Either that or he hasn’t used an xbox in a long time.
This is all assuming there’s no massive memory leak bug somewhere that can just be fixed, but I really don’t think there is as memory leaks are not that hard to find and fix usually and I’m sure they’d have hit this one on the head long ago if it was that simple.