Is DKS really that much more expensive than a DVD release of FoV would have been on the Xbox?
Microsoft has limits on the size and number of updates that can be made for Xbox titles, as well as restrictions on what can be released for free. Any attempt to split up the add-on into chunks under the DLC limit would be vetoed. If FoV on the Xbox was the same size as on PC, Larian would have to split the add-on into 3 sections, so it would be kind of hard to slip that by MS unnoticed.
Even if removing the side quests, etc, could get the core and side quests (etc) separately under the limit, there is no guarantee that side quests could be released for free.
Another game was mentioned here awhile ago (don't recall the name), where the PC version had some free map packs released, but due to MS' restrictions the Xbox version did not, despite the developer's intent to do so; the maps eventually got included in a later add-on.
