See it another way. xCloud is the equivalent to PlayStation Now that is abailable at PS4. It is a gaming pass where pay a monthly fee and get many games.Why not? Because it makes no sense from a practical or technical standpoint. XCloud is not on consoles. XCloud streams games from MS servers. Consoles already have the games so there's no need to stream from MS servers. What you're describing is streaming a stream of another stream. That's nothing but lag on top of lag.
Which one of these experiences make sense?
1. Console → Stream → You.
or
2. Server → Stream → Console → Stream → You.
Why would anyone want 2? There's no advantage. Which is why MS doesn't have XCloud on consoles. It would be redundant and a worse experience.
The latency iPhone to XBox is the same like Controller to XBox. An iPhone or iOS device is just another display. You can do the same with a wireless HDMI Transmitter.
So,it is definitively possible - and it would a nice and legal way to bypass Apples policies.