Hey gang, I searched around and wanted to see if I could find the best topic to reply to, rather than submitting a new thread. But I can do that if preferred.
TL;DR - there's a decent workaround:
Create a virtual disk (.vhdx / dynamically sized) on your Drive Pool via Windows Disk Management, format it as NTFS with a 4K cluster size, assign it a drive letter, then install your apps to it.
From my understanding from this, the EFS implementation in Windows produces far too many unreasonable hurdles for filters and other filesystems to interoperate with Windows Store Apps (inclusive of Xbox Games Pass content). Among other things.
The EFS... stack? also makes the assumption that the filesystem's cluster size is 4KB. So if you're using something other than that, it leads to update errors eventually, even if you seemingly had no issues downloading and installing store apps originally.
From Googling the original error code, it appeared that it was somewhat common on cloud gaming service VMs, as they often deploy with disks formatted with >4KB cluster sizes, which is the root of this archaic issue. I had the same errors on a Storage Space formatted as NTFS with 16KB sectors (all before I moved to Drive Pool!). Sidenote - I don't know why that was the default allocation unit size, but by the time I discovered this, there was no way I was going to evacuate the filesystem to reformat it. My guesses are that it's due to volume size (20TB), or simply because Storage Space defaults are that way out of some memory or I/O management efficiency.
So, the workaround that seemed to work for everyone was to create a virtual disk. You might have issues mounting the disk without the "Hyper-V Module for Windows PowerShell" feature installed/enabled. This comes with Hyper-V if you choose to install that, but the specific module should be installable without, I imagine. Still, the biggest concern is that I'm not sure if this is available in Home edition users or not.
So, in case it helps, here's a link to a bunch of ways to mount a virtual disk: https://www.tenforums.com/tutorials/61391-mount-unmount-vhd-vhdx-file-windows-10-a.html. You mainly want to try to find a process that can be done via command-line, so you can automate it in a startup task. You really want this disk mounting on startup.
Creating your virtual disk and auto-mounting it:
Open Disk Management in Windows.
Select a Drive Pool, or another desired volume to store your virtual disk.
Under the Action menu, click Create VHD.
Follow the simple steps to create and size the disk.
Locate the new disk in Disk Management (at the bottom, probably. It'll have a blue icon).
Initialize the disk (likely GPT), then create a new Simple volume. NTFS, 4096-byte allocation unit size (4K clusters). Optionally give it a label, assign it a drive letter.
[Edit: 2020-10-15] Create a scheduled task to auto-mount your .vhdx file on startup. I used the steps documented here: https://www.tenforums.com/tutorials/138629-auto-mount-vhd-vhdx-file-startup-windows-10-a.html
However if you're running Windows 10 Home edition, you may need to refer to the other link above in section 3, for more options.
Finally, start using the disk. In the Xbox app, go to Settings -> General, then under Game Install options, specify your new virtual drive's letter under "Change where this app installs games by default."
Go start downloading and installing games. In the Apps & Features settings page, you can also right-click and move preexisting Xbox/Store Apps if you need to.