Correct, DKS is both the original game (with some updates) and add-on. It is available for Xbox, but has not been released yet in the US (all of the North American publishers wanted to wait for sale results from the rest of the world before making a commitment). We are still waiting for an official release announcement from the publisher (for the Xbox version of DKS and the physical PC release in the US), so all we know now is it should be out Q1 of this year.
If you think you would play the game again with a different character style, etc, then you might as well keep going in D2:ED, since it will probably be another month or two before DKS is available in North America. If you don't usually replay RPGs, then you might want to wait for DKS.
Right now D2:ED saves are not compatible with DKS, due to various changes made. Lar did mention the possibility of creating a tool to import a D2:ED save and export it into the FoV section of DKS, but if such a program is release I don't know if it will also be available on the Xbox. In theory such a tool could make into the US Xbox release (as long as that change wouldn't force them to restart any testing, etc), or be released as DLC.
The game was originally designed to allow the dragon form to attack ground opponents, but it required too much memory and had too much of a frame rate hit; see Lar's post in the topic Design ideas for Divinity 3 (mostly for Larian)